Preamble

The House met at Eleven o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

ELECTRICITY SUPPLY INDUSTRY (REORGANISATION)

11.4 a.m.

The Minister of Power (Mr. Roy Mason): With permission, Mr. Speaker. I wish to make a statement on the reorganisation of the electricity supply industry in England and Wales.
I have been giving a great deal of attention to this matter in the light of the industry's present and future needs and of developments since the review by the Herbert Committee in 1956. For this purpose I have had extensive consultation with the leaders of the industry, including representatives of the employees, and with various interested organisations.
I have come to the conclusion that the central direction of the industry needs strengthening and that the present degree of autonomy of the C.E.G.B. and area boards is not acceptable in an industry which is vital to the economy, makes heavy calls on national resources and has to take many far-reaching decisions on technical and financial issues of great complexity.
I propose, therefore, to reconstitute the Electricity Council and rename it the Electricity Authority, with new powers to plan and control the policy of the industry as a whole. The Electricity Authority will have the duty to promote the maintenance and development of electricity supply throughout England and Wales, and to secure the efficient use of resources by the industry. To discharge this duty, it will settle, subject to my approval, the capital development programme for the industry as a whole, including the programme of each of the constituent boards, and will be empowered to give instructions to boards on strategic issues relating to the policy of the industry generally. It will be responsible for keeping under review the

performance of the individual boards. It will also keep under review the structure and organisation of the industry, and will advise me if changes are needed. And also, generally, it will carry on the present responsibilities of the Electricity Council, including those for research and for labour relations.
The Authority's power to give instructions on strategic policy to boards needs to be made wide enough to enable it to carry out its statutory functions properly without, however, leading to interference in ordinary management. I propose, therefore, that it should cover classes of issues specified by me under Statutory Instrument subject to the negative Resolution procedure. The most important issue on which I envisage that the Authority should be able to give instructions from the start is on the principles to be followed in framing tariffs and special agreements.
The Central Electricity Generating Board and the area boards will remain statutory bodies appointed by me, responsible for the generation, transmission, distribution and supply of electricity, with a statutory obligation to make ends meet. They will, however, discharge these duties within the framework of a broad policy for the industry as a whole which will be settled by the Electricity Authority.
By this reorganisation, I hope to obtain the advantages of the central direction of major policy which is at present lacking, while at the same time retaining the advantages in terms of managerial responsibility and local initiative which is the feature of the present system of largely autonomous boards.
These changes will require legislation, which I hope to be able to introduce during the next Session.

Sir J. Eden: Any move that helps to end the split between generation and distribution is to be welcomed. While the proposed inter-relationship between the Authority and the area boards may be clear enough, will the Minister say what exactly are to be the sanctions which the Authority will exercise over the C.E.G.B.? How will it end the major weaknesses of the C.E.G.B., such as overmanning, which were identified by the P.I.B. and the Wilson Committee?
The right hon. Gentleman said that the Authority's powers should cover classes


of issue to be specified by him under Statutory Instrument. Other than the structure of tariffs, what has he in mind? Will he amplify that statement? Is there not a danger that the Minister is to perpetuate the wasteful duplication of the industry's capital programme by weakening the responsibility of management?
Finally, will the right hon. Gentleman say what the future holds for the present Chairman, both of the Electricity Council and of the C.E.G.B.; and who is to head the new Authority?

Mr. Mason: As to the C.E.G.B., flowing from the examination of the Reports of the P.I.B. and the Wilson Committee, most of the recommendations have already been dealt with. I have had a long series of discussions with the Chairman of the C.E.G.B. and some recommendations have already been put into effect.
I thought it right and proper on this occasion to use the negative Resolution procedure, because hon. Members who are aware of the structure of the electricity industry will know that it has been changed twice before. In giving the new Authority its new powers, which will he very much stronger and, of course, will include the overseeing of the C.E.G.B. and the twelve area boards, if the powers need to be strengthened instead of my having to introduce a new Bill to Parliament, I thought that I would be able to legislate through the negative Resolution procedure. Parliament will still, therefore, have an opportunity if I want to strengthen or weaken the powers of the Authority, to question it.
I brought in Sir Norman Elliott as Chairman of the Electricity Council for an interim period. Whether or not he will be a member of the future Authority is still in question, but I will be looking for a new Chairman of the Authority, who will be seen to be the chief spokesman of the industry as a whole.

Mr. Palmer: May I put two points to my right hon. Friend? Whilst paying full and warm tribute to him for the wide consultations he has had, particularly with the trade unions, who are grateful to him, may I ask whether he does not think that it would be valuable to opinion generally if a White Paper could be published? Secondly, does he think that, in fact, these proposed

changes go far and deep enough to reorganise the industry to meet the increasingly competitive conditions which it now has to face?

Mr. Mason: On the latter point, because of the negative Resolution procedure which I wish to introduce, I shall have the opportunity quickly to strengthen the powers of the Authority if, in retrospect, we feel that they are not strong enough. As to a White Paper, I would have thought that my statement and the answers to questions that will flow from it may be sufficient to inform the industry as a whole of our plans for it. I will, however, keep an open mind on the question of a White Paper.
Concerning consultations, a lot of people in the industry are aware of what is being generally proposed. I have consulted the Electricity Council, the 12 area board chairmen, the C.E.G.B. and trade union representatives. To allay any anxieties about the future, I thought it desirable to make a statement as quickly as possible.

Mr. Lubbock: While agreeing that there is need for a greater degree of central co-operation on such matters as capital expenditure, for the reasons given by the Minister, may I ask what consideration he gave to replacing the present structure of the C.E.G.B. and the area boards by a number of bodies on the lines of the South of Scotland Electricity Board which would handle generation, distribution and sale?
Secondly, will the Minister include in the Bill the principal matters on which he proposes to give statutory directions, so that a full debate can take place on the Floor of the House at the time of the Bill, leaving only subsidiary matters on which he has not yet made a decision to be covered by Statutory Instruments?

Mr. Mason: On the latter point, I would welcome suggestions from hon. Members. I have mentioned that general principles on tariffs will be one of the first matters to be dealt with by the Authority. They will also include computer policy, purchasing policy and matters of that kind, on which there will be specified issues affecting the industry as a whole, so that the new Authority will be able to lay down—and, indeed, issue—directions to the C.E.G.B and the area boards on those matters.
We considered joint generation and distribution but on the generation side we are now beginning to reap the benefits of the economies of scale. The C.E.G.B. is by far the largest integrated electricity supply network in the world and because of the introduction of the 600 MW generating sets and 2,000 MW stations, I thought it best to leave it alone at this stage. Again, however, the Authority will have the right to be able to look at structure and advise me accordingly.

Dr. John Dunwoody: Does my right hon. Friend think that his proposals will have any effect on the cost of electricity to the consumer? Does he, for example, think that these changes will mean the end of the regional variation in electricity costs?

Mr. Mason: I would have thought that this was a sensible move, at least to stabilise, if not reduce, costs, because the Authority will be able to oversee the whole of the industry and use its large national resources much more effectively and efficiently. When one recognises that the industry has a turnover of £1,200 million a year and spends £600 million a year, there is urgent need for an overseeing authority to control this.

Mr. Ridley: In welcoming the general tenor of the Minister's statement, may I ask whether his desire to achieve central control of electricity generation and supply will be extended to Scotland, where he has small, fragmented supply and generation units in one? Does his statement mean that he will be able to make Orders about the future structure of the industry under the powers which he proposes to take in the Bill?

Mr. Mason: Initially, I had in mind that the negative Resolution procedure would be used to look at the powers of the Authority and whether it was necessary to increase or decrease its powers according to how plans work out. I would hope that the negative Resolution could be used so that if the Authority,

in looking at the structure of the industry, wished to make some sort of change, instead of having to prepare a major Parliamentary Bill, the negative Resolution could be used and, although Parliament would be able to debate it, it would not necessarily mean going through the whole rigmarole of a major Bill.
This was not examined for Scotland where, as the hon. Member knows, electricity supply is different, being based partly on water power and with sparsely populated areas to cover. I would, however, hope that we would be able to increase the consultative procedures between England and Wales and the Scottish boards.

Mr. Emery: The Minister will realise that there are two major omissions. Will he, therefore, say what consideration he has given for the overall manpower situation in the industry? Does he envisage its being reduced? What are the financial implications? Does he foresee a saving or does he envisage extra cost factors within this arrangement? Will the powers which the right hon. Gentleman is taking by Statutory Instrument mean that he could give directions for a single tariff structure for electricity throughout the whole of England and Wales?

Mr. Mason: I cannot at this stage say whether there will be any great effect on manpower. As to financial implications, the hon. Member will know that I have not yet established the financial objectives for the industry, although I hope to do so quite soon. When the Authority is established. I shall then be getting advice from a body overseeing the whole of the industry and, therefore, in that respect, I will be better advised.
Concerning tariffs, I thought it right from the start that the Authority should be able to lay down principles on tariffs and be able, if necessary, to give guidance and instruction to the C.E.G.B. and the area boards about tariffs for high-load factor users, big industrial load users, and so on.

Orders of the Day — FINANCE BILL

Order for Third Reading read.

11.18 a.m.

Sir Cyril Osborne: On a point of order. May I seek your guidance and help, Mr. Speaker, and ask you to be good enough to give a Ruling as to the scope of Third Reading of the Finance Bill? I sought the advice of the Clerk of the House, who referred me to page 825 of Erskine May, which states:
Debate and amendment on the second and third reading of bills introduced on ways and means resolutions are governed by the ordinary rules of relevancy.
I have always understood that Third Reading was confined very closely to what was in the Bill and that nothing outside it could be dealt with. This leads, however, to a sterile debate and it means that Third Reading is taken almost "on the nod" and loses its value.
This is the most important Bill throughout the whole year, affecting the lives of ordinary citizens. I submit for your consideration, Mr. Speaker, that a wider debate on Third Reading would be more helpful to the House and to the country. It would enable hon. Members to bring in other issues which affect the citizen. If you can help me, I shall be grateful.

Mr. Speaker: The hon. Member reminds me of the Merchant of Venice, in which the judge was asked to do a great right by doing a little wrong. I am, however, tied by the procedure of the House.
I am grateful to the hon. Member for his courtesy in letting me know that he proposed to raise this point of order. What he proposes, however, runs counter to the rules of order which have so recently been examined by the Select Committee on Procedure. The evidence given to the Select Committee in its Sixth Report of 1967 showed that the equivalent of about four and a half days per Session could be saved if the Question on Third Reading were to be decided without Amendment or debate. The Committee accepted the force of that submission in recommending that debate on

the Third Reading of any Bill—that is to say, not excluding the Finance Bill—should be permitted only if there is a six-month or reasoned Amendment against it signed by at least six hon. Members. The rule of the House, which I must enforce, is that even on those occasions debate must be restricted to what is in the Bill.
I regard that as sound because at this late stage all opportunities for amendment have been exhausted and the only Question before the House is whether the Bill should be accepted or rejected as it now stands.
Therefore, I am not able to accept the submission of the hon. Member that I should widen the ruling governing the Third Reading of the Bill. I might remind the hon. Member that in looking up some of my earlier Rulings on this issue, I find that at col. 1829, on 4th July, 1968, he supported the point of view which I am putting to the House.

Mr. James Dickens: Further to that point of order, Mr. Speaker. You have given a most important Ruling this morning. You have also drawn attention to the Ruling which you gave on 4th July last year when some of us were called to order for discussing the wider aspects of the economic situation, in which the Third Reading of the Finance Bill plays an integral part. When the Bill was debated in this House last year, the Chancellor and the right hon. Member for Enfield, West (Mr. Iain Macleod) both made wide-ranging speeches covering the entire economic situation. I make no complaint about that, but I submit to you, Mr. Speaker, that it is in the interests of back-benchers in all parts of the House that when we catch your eye we should be given the same rights and opportunities as Front Bench Members to debate the economy. So I hope that now you have made this Ruling this morning it will be applied as rigorously to Front Bench speakers on both sides, as you apply it to the rest of us.

Mr. Speaker: Order. I cannot recall how rigorously or non-rigorously I have applied it to the Front Benches in the past, but I recall to the House that the Chair when it makes a Ruling does treat all hon. Members equally, even if some are "more equal" than others.

11.22 a.m.

The Chancellor of the Exchequer (Mr. Roy Jenkins): I beg to move, That the Bill be now read the Third time.
We have had a series of interesting and mainly constructive debates at the various stages of the Bill, as a result of which the Bill has, I believe, in many ways been strengthened and improved, but its essential structure has survived unchanged. From the Treasury Bench the main burden has certainly fallen to my right hon. Friend the Chief Secretary, ably assisted by my hon. Friend the Financial Secretary and my hon. and learned Friend the Minister of State.
My strong impression from the debates I have heard and the reports of those at which I could not be present, is that the balance of measures has stood up pretty well to intensive and detailed examination and scrutiny. It has certainly been subjected, as a Finance Bill should be, to detailed examination and scrutiny. Although in revenue terms we have had to be sparing in concessions, we have been able to make a considerable number of Amendments, especially on gaming and loan interest, which have had the effect of mitigating certain proposals which might otherwise have been over-severe, without doing any damage to the principle underlying them. The revised procedure this year has, I think, been generally regarded as an improvement.
I turn now, as is traditional when a Chancellor speaks on the Third Reading, to the main purpose of the Bill and its relation to our present economic position. This year's Budget, which the Bill en-shines in legislative form, was intended to accelerate our progress towards the substantial balance of payments surplus we need. It may be helpful if I indicate briefly to the House how I see the economic position at present and how this fits in with the object of the Bill. The latest available information suggests that there has been only a modest recovery in consumer spending since the first quarter. Sales of new passenger cars remained at a relatively subdued level, though export production has been very high, and indeed in May it was, for the first time in many years higher than home production. This shows that a vigorous export policy, as well as being of inestimable benefit to the balance of payments, can also help manufacturers to

iron out temporary dips in home sales. Thus in May the increase in export production just offset a decline in home market production, making the total the same as in April.
The policy of restraining consumer expenditure through fiscal and monetary measures is also showing results in the field of instalment credit. Although new credit extended by durable goods shops has fallen very little since the end of 1968, there has been a more substantial fall in the new business of finance houses. I have no doubt that this fall is to a considerable extent due to the provisions on loan interest—Clauses 18 and 19 of the Bill—about which there has been so much debate and controversy during the passage of this Bill. There has also been an encouraging fall in bank advances to individuals other than for house purchase—from £616 million last November, to £562 million in May. Personal savings recovered in the first quarter of 1969 after the fall in the preceding quarter. This is also reassuring—and I hope the recovery will be reinforced when the Save-As-You-Earn scheme comes into operation in the autumn.
But although we have maintained the squeeze on private consumption, by no means all the burden has fallen on consumers. In the last 18 months public expenditure also has been rigidly controlled within published targets. It continues to run within those targets, and I intend that it should stay there. I know that there are worries about the level of investment, which arose on the Clause relating to corporation tax, and some weeks ago by a number of alarming predictions were made. Since then information has become available that the trend is still strongly upwards, even though less markedly so than at the end of last year.
So much for the home economy. I can also report reasonable progress on the balance of payments. The visible trade figures for March, announced on Budget day, were disappointing; the figures for April were even more so, though the current very high level of invisibles, together with the under-recording of exports, probably means that even in these two bad months, we were not far from balance on current account; and that is taking account of the separate and adverse item of U.S. military aircraft.
But if March and April were bad, May and June were both very good months. An average visible deficit of only £21 million before taking account of the under-recording, if it were to be maintained, would give us a very healthy current account surplus. Exactly how healthy depends of course on how invisible earnings keep up. In the first quarter they averaged £47 million a month. There is no reason to suppose that they will not continue at a very high rate. People who talk glibly of devaluation having failed, pay insufficient regard to the strong and progressive improvement in the invisible account since the end of 1967. This does not mean that we can disregard a deficit on visible trade: we need a surplus there too. But it does mean that in judging our progress we ought to look at the trade account as a whole, invisibles as well as visibles. This gives a much more realistic as well as healthier, picture of our true position than can be got by concentrating on the monthly trade figures.
Indeed I very much wish that it was possible to publish each month, at the same time as the trade figures, a statement of the invisible account during the same month. If we could do so, it would dispel a lot of gloom. Unfortunately it is not possible. The figures do not become available in time—indeed some of the components become available quarter by quarter rather than month by month. All one can say is that invisibles have responded particularly well to devaluation; that the invisible surplus in the first quarter was particularly high; and that there is no reason to believe that the trend will not continue to be very favourable.
But we ought not to go to the other extreme and put up with a still fairly sizeable visible deficit on the grounds that it is balanced by an invisible surplus.

Mr. Robert Sheldon: In view of the importance of what my right hon. Friend has said about invisible earnings, could not an estimate, even if not up to date, be given together with the trade figures so that a more accurate perspective could be given?

Mr. Jenkins: It really would not be possible to make a meaningful estimate month by month. All that can be done is to keep in mind, as I think informed commentators do increasingly, the aver-

age of the preceding quarter. This cannot tell us exactly what is happening in the actual quarter but it is the best guide that we have. I should say that there is the counter item—very much smaller—of the separate U.S. military aircraft transaction. Those are broadly the three components of the current balance—the visible deficit, the invisible balance, generally very favourable, and the U.S. military aircraft item.

Mr. John Nott: In order to try to cut down the neurosis about the trade figures, may I ask the right hon. Gentleman whether he has given some consideration to a radical change whereby the figures themselves might be published quarterly together with the invisibles? Has this possibility been considered?

Mr. Jenkins: Yes, I have thought of that. There are considerations both ways. I am not sure that the advantages of moving to a quarterly system are as great as is sometimes thought. I would be doubtful about depriving ourselves, the country and the world of as much up-to-date information as can be given. I am not sure that this would be a wholly desirable move. At any rate, it is one which I and my right hon. Friend the President of the Board of Trade do not propose to make at the present time.
Because the visible deficit remains important it is encouraging that exports, which earlier gave some signs of being stuck on a ledge, even though a fairly high ledge, seem now to be surging upwards again, particularly to Europe. One cannot rely on an increase every month, but the flow of new orders has been and remains most encouraging.
This does not mean that we are through our difficulties, or that I shall shortly be able to announce the premature termination of the two years' sustained effort, or that the provisions in this Bill are not necessary. We have to ensure that we have the capacity and energy to deliver the export goods which the competitive edge of devaluation, which has by no means disappeared, has given us. There are still too many reports of firms failing to meet delivery deadlines, of poor workmanship and inadequate after-sales service. We have a lot to learn about aggressive export salesmanship, and too many industries


Still think primarily of the home market and regard export sales as a sort of filler-in. Those which do so are remarkably shortsighted. Export markets have expanded and will continue regularly to expand a great deal more than the home market itself. That applies as far as all countries are concerned.
It is not a question of any relative rate of growth. Export sales add to the profits of a company, and, whether or not they are reckoned as more profitable than home sales, one can normally be pretty sure that total sales and total profits will be considerably increased by a successful export drive. I am, therefore, not at all despondent about our progress towards our balance of payments objectives which this Bill is designed to underpin.

Sir C. Osborne: Does the right hon. Gentleman maintain his hope of reaching a £300 million surplus during the current year?

Mr. Jenkins: Yes, I certainly make no variation from what I have said on that—the current financial year. I take it that the hon. Gentleman meant that.
It is only when we have secured and have shown ourselves capable of maintaining a sizeable balance of payments surplus that we can look forward with confidence to a period of sustained economic growth and prosperity. I have always emphasised that a balance of payments surplus is not an end in itself. We need it for severely practical reasons. We still have debts which are formidable but which are in no way unmanageable. We must not dismiss our indebtedness as though it were of no account. Equally we must not become obsessed by it. Nor should we over-estimate its size.
Some grotesque estimates have been made. The right hon. Member for Stafford and Stone (Mr. Hugh Fraser)—I let him know that I would refer to this matter this morning—speaking in the debate on the Letter of Intent, made some wild allegations about the figure of official borrowing other than from the I.M.F., given in Table 7 of the Budget Report. I am glad to be able to tell the House that the right hon. Gentleman was talking nonsense. The figure given in the Budget Report disclosed the whole position as it was at the date to which the Report

referred. Of course, it is a very big sum, but it is not unmanageable, and since then the position has improved. So far this calendar year, our net repayments of external debt have been on a very substantial scale. They have amounted to very nearly one billion dollars—1,000 million dollars. There is still a long way to go, but this figure shows that there is no question of the problem being insurmountable.
The Government intend to continue with the present economic policy. This Bill is consistent with and essential to that policy. It lays certain further burdens on taxpayers, but does so in a way which I believe is fair and equitable. It helps those most in need. In several fields it makes a modest but worth while contribution to the reform of our tax system. It removes certain anomalies. It has stood up to the intense scrutiny of the House, and I now ask that it should be given a Third Reading.

11.36 a.m.

Mr. Terence L. Higgins: If I may take up the final point made by the Chancellor of the Exchequer, that the Bill has stood up to the scrutiny of the House, I feel bound to say that I totally disagree with him. The fact is that the Bill which we are now considering is very different from the Bill which was introduced on Second Reading. I think it is abundantly clear that the Bill has not stood up to the scrutiny of the House. It has, in fact, been radically altered in many respects.
When my right hon. Friend the Leader of the Opposition spoke in the Budget debate he described it as
a dead-end Budget by a fag-end Government."—[OFFICIAL REPORT, 15th April, 1969; Vol. 781. c. 1045.]
I do not think that at that time we had fully appreciated just how badly thought out was the Finance Bill which was to embody the Chancellor's Budget. If we look at the way in which it was ill prepared, we find that both in concept and in drafting it was quite clearly prepared by a Government who were completely exhausted both in ideas and so far as the implementation of those ideas was concerned. Therefore, when we look at the Bill on Third Reading, considering what is in the Bill, I do not have the slightest doubt that it is now a great deal better than it was at the time, but that


it really ought never to have been as bad as it was in the first place. In almost every respect the provisions of the Bill have had to be altered. It is probably true that there have been few Finance Bills, if any, which have been more amended in Committee and on Report than has this present Bill.
There is a point here which ought to be made. A number of people on both sides of the House, and indeed outside the House, have said that there is a strong case for having a Select Committee, perhaps, or some other forum, where the proposed changes in taxation can be examined before they come to the House. I am not surprised that there is an increasing move in this direction, and I feel that it is an innovation which might well be considered with very great seriousness indeed. The matter of the actual rates and so on must be for the Chancellor himself, but it is glaringly apparent, particularly on the disallowance on interest Clauses, that there are a number of things which any Government ought to be able to see should never have been included in the Bill.
In my view, we have been somewhat fortunate in the way in which the debates have taken place. I still have some yearning for the traditional system under which the Bill is taken in Committee and on Report on the Floor of the House, but certainly the procedure that we adopted this year of having part of the Committee stage on the Floor of the House and part in Committee upstairs was a vast improvement on the situation last year. Remembering the detailed discussions on disallowance, and particularly the sitting which extended from 10.30 one morning till 5 o'clock the next morning, I think it is true that we made a very great deal of progress in discussing extremely detailed points.
The trouble has been that the Government have given way on so many points that the pressure on the Chair, if I may say so, and its advisers as well as on the Opposition has been very great because of the considerable delay in the Government's putting down their own Amendments on Report consequent upon the proceedings in Committee.
I come now to the so-called concessions. The Chancellor says that measures have been taken which have altered proposals which were over-severe without damaging principles. In fact, the spec-

tacle has been remarkable to behold. I entirely endorse what the Chancellor says about the tremendous amount of work which the Chief Secretary has done on the Bill, but the fact remains that the right hon. Gentleman has been in an extraordinary position. One could almost say, "You cannot flap Jack", but the Chief Secretary has never been at a loss for a new principle to replace the principle which he previously advocated, and he has never had the slightest hesitation in throwing the first batch into the wastepaper basket. Particularly on the question of disallowance of interest, once they had rightly excluded loans for business purposes and for house purchase, the Government could not find a stopping place at which they could settle on any principle enabling them to take a firm stand.
Under pressure from the Opposition, there have been several improvements in this part of the Bill. I enumerate them briefly: the question of loans for estate duty, which ought never to have been in the Clause; the question of loans for buying partnerships and machinery for partnerships; the question of existing loans already made on the basis of the previous legislation; the question of property companies; and then the defeat of the Government Amendment in Committee which was designed to tighten up some of the provisions of the Clause, on some of the absurdities of which, at least, the Government gave way.
The trouble is that these changes are heralded in the Press at a later stage as concessions, whereas, in fact, they were changes made to correct absurdities which ought not to have been there in the first place and on which the Government gave way as a result of pressure from the Opposition.
On these matters, it is our view that the Government's proposals are totally wrong in principle and ought never to have been introduced in the first place. If I may make a point on detail, I am concerned still about the question of interest paid on loans advanced for house purchase by insurance companies and the question whether payments are made gross or net. This means that people will have to find extra money until they receive the tax relief. I urge the Government to speed up the procedure for revising P.A.Y.E. assessments in order to remove that by-product of their legislation.
The complexities which ordinary accountants will have to deal with as a result of this part of the Bill, on top of all the other changes in corporation tax, capital gains tax, close companies and the rest, are quite terrifying. We started with two Clauses and a Schedule. Then we had six new Clauses tabled and vast Amendments made to the two original Clauses and the Schedule. Plainly, the Government came before the House with a fundamental change in the law without having thought the situation through.
The Chancellor said in his Budget speech that the intention was to help to cut bank advances. It is abundantly clear now that the tight credit policy which was originally adopted is becoming increasingly less necessary as a result of his adoption now of a tight money policy, that is to say, the Chancellor is restricting the credit base rather than trying to restrict advances. Thus, in the situation as it now exists, the need for that proposal, if that was the rationale behind it, has almost vanished, and it will become even less necessary in the future.
I hope, therefore, that the Government will have second thoughts about the entire matter, and, apart from the question of tax avoidance and gilt-edged which we fully appreciate, will entirely alter their approach. It is just loading the Statute Book with pages and pages of almost unintelligible gibberish to achieve a result which is no longer necessary and which is wrong in principle.
Now, the other so-called concessions. I take, first, the amusement tax. We were perfectly right in Committee to describe this as an annihilation tax. That is what it was. At the rates fixed, it was clear that those concerned would go out of business and not only would the Government fail to collect their revenue under that measure but they would not collect on selective employment tax, purchase tax or corporation tax which would otherwise be paid by such people.
I pay tribute here to the Financial Secretary for the great trouble he took to look into the accounts and to introduce new proposals. For many operators who diverge slightly from the average, how-

ever, it will still be not so much an annihilation tax but a slow death tax. At the same time, there has been a change here, but, once again, the proposal should never have been in the Bill in the first place at the level of tax which the Chancellor proposed. If he had done the least homework beforehand, he would have realised that.
There have been other changes, for example, in the so-called "Beatles" Clause. There are some improvements there, but it is still far from perfect. In our debate yesterday, my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin) emphasised the importance of the changes which the Government were proposing with regard to estate duty. In all those areas there have been improvements either because of the wrong drafting of the Bill in the first place or because the Government have at least seen sense on points which we have pressed upon them for a long time.
I come now to a major question on provisions of the Bill which have not been adequately changed, in particular, the question of selective employment tax. The selective employment tax is causing greater and greater concern not only outside the House but among right hon. and hon. Members. It is significant that on the relevant Budget Resolution the Government's majority slumped to no more than 28, and then, after a change of Chief Whip to improve the situation, it improved to only 29. That reflects the agitation which is felt throughout the House on this matter.
I shall not weary the House with further argument on the reasons why we consider that the selective employment tax ought to be abolished. I mention only two. The Chancellor completely gave way on the argument which he put in his budget speech about the effect of the selective employment tax on the cost of living, and he admitted that it largely resulted from the way in which the cost of living index is compiled, falling as it does on the lower income groups and concentrating upon them. He revised his estimate of only one-third being passed on to something more than half. I guess that that figure grossly underestimates the true extent to which the cost of living is affected by the S.E.T. increase which


is still contained in the Bill and which continues to give grave concern.
Not least important is that the S.E.T. remains a tax which cannot be remitted on exports. The Chancellor made great play this morning of the importance of invisible exports, yet he is still imposing a heavy tax on many of those responsible for invisible exports, not only export houses, for example, which we sought to exclude from the tax in Committee, but also the hotel and tourist trade. If it is true that our balance of payments now is being greatly helped by invisible exports, and if it is true that those exports are going up, the Chancellor can take no credit for it. In fact, he is doing a number of things, in particular, in the selective employment tax increase, which are deterring the growth of invisible exports rather than encouraging them. He ought to be condemned for it. I repeat that we propose to abolish this tax with all its absurd anomalies.
Now, just a postscript on selective employment tax before I come to my peroration. In our debates on the tax over the years, the Government have gone to great lengths in drawing the Money Resolution as tightly as possible on each occasion in order to prevent the House debating the matter in detail. This is a deplorable procedure. We should have thought that this was a matter which should be discussed as freely as possible.
None the less, over the years, the Opposition have managed to get Amendments into order, so that these points can be debated. We started years ago by reducing the tax to ½d., rather than abolishing it, and a number of these devices have been necessary to get Amendments into order. This has become something of a game between the Opposition and the Government draftsmen. But people outside do not realise the extent to which discussion has been deliberately inhibited by the Government on these subjects.
This is reflected in the extraordinary fact that, recently, I have had a number of letters asking what my position is on selective employment tax. After four years debating it in the House, and I do not know how many speeches outside, it is a little hard to get letters asking what my position is on this tax. To some

extent, this reflects the working of the Money Resolution. But what we were disturbed about—

Mr. Dickens: In replying to this entirely proper questions from his constituents, I hope that the hon. Gentleman will explain to them how he and his party will produce £600 million of revenue either from taxes on services or in some other ways.

Mr. Speaker: Order. The hon. Gentleman will not be able to do that this morning.

Mr. Higgins: As the hon. Member for Lewisham, West (Mr. Dickens) has made that intervention about nine times and is invariably told that I cannot reply, he might consider making it when we can reply, which would be an advantage.
Among the letters to which I referred, there have been great representations about the unfair competition which many retailers concerned with electrical or gas appliances have suffered because the nationalised industries at retail level have been exempt from selective employment tax. My hon. Friend the Member for Wanstead and Woodford was right to refer last night to the Chancellor's announcement that S.E.T. would be imposed on the nationalised industries as a sly manoeuvre. For years now, we have, inside and outside the House—my hon. Friend the Member for Bournemouth, West (Sir J. Eden) only a few days ago—emphasised the unfairness of this.
Why did the Chancellor not make the change in his original Budget speech—he must have been aware of this anomaly long since—or in earlier Budgets, instead of not even mentioning it throughout these debates? Then a Question is miraculously put down—perhaps that puts it a little high and I should say no more than "conveniently put down"—for Written Answer yesterday and the Chancellor mentions this matter, which is of great concern to retailers, on another Amendment, irrelevantly concerned with milk rounds-men. That is a deplorable device. We should have been able to discuss this in our debates.
It is not enough to say that our Amendment on this subject, to relieve other retailers rather than impose the tax on the nationalised industries, which was a better way of doing it—

Mr. Speaker: The Amendment to which the hon. Gentleman refers is not in the Bill, because it was defeated.

Mr. Higgins: No, Mr. Speaker, it was not defeated, it was not even called. This is a matter of dispute between the Chancellor and myself. I thought that it was in order and he thought otherwise. But he could have found an opportunity of debating this extremely important matter instead of resorting to that device.
This tax should be abolished. We do not think that, because Professor Reddaway's terms of reference are so circumscribed, there is any need to await a report on this subject before doing so.
The Chancellor touched on the economic situation. In our present situation, the balance of payments is gradually improving. We are all glad to see that, and hope that it will continue. The right hon. Gentleman says that people are wrong to say that devaluation has failed. That is the wrong way to put it, because it suggests that devaluation was a deliberate act of policy, which it clearly was not. But whether it has failed or not, it is no fault of the Government, because by their own measures they have done everything possible to frustrate devaluation.
It is interesting to see in The Times Business News today the headline:
I.M.F. agrees to count 'lost' exports for £300 million target
Not only do we abandon the £500 million target, but we then take this nice device of changing from the calendar year to the financial year. We will now include this amount of miscalculation in deciding whether the £300 million is achieved or not.
But these statistics reflect only part of the reality. The important question is whether we needed an improvement of £300 million in the existing situation. It is not valid to say that we will knock it off from both sides of the equation, because clearly the £300 million was the amount of improvement needed in the situation and not the amount needed, given what the statistics happened to say, and happened to say wrongly. Anyway, the figure is far below what the Chancellor advocated earlier. We hope that this will all prove all right, and that we shall get a significant improvement.
This Bill is yet a further massive increase in taxation—£954 million in last year's Budget, an autumn Measure which was bigger than any Conservative Budget, and now £315 million or so in this Budget, plus the further massive increases in National Insurance charges, which we now know to be much greater than was thought at the time of the Budget speech. All of these reflect a failure of policy which we can only deplore.
We believe that the Bill is better than it was, but it should certainly never have been as bad as it was in the first place. Therefore, while recognising that the Government must necessarily have a Finance Bill, we feel that this one it totally inadequate, that it reflects a poverty of policy and an inadequacy of implementation. Therefore, we cannot regard it as a Measure about which we can be enthusiastic, so far as the country and its economy are concerned.

Several Hon. Members: rose—

Mr. Speaker: Order. The House may perceive that there is a goodly number of would-be orators. Reasonably brief speeches will help.

11.58 a.m.

Mr. James Dickens: The Finance Bill forms an integral part of the Government's economic strategy. In his speech this morning, the Chancellor dealt with the economy, and before I come to the details of the Bill I too should like to follow him in this respect. I find in debating these matters that my right hon. Friends all have certain characteristics in common. They are able, they are amiable, they are well-meaning, and they are also utterly wrong.
My right hon. Friend drew attention to certain apparent improvements in the country's economic position. He has discussed the target of £300 million surplus on current and long-term capital account in the current financial year. If one takes into the reckoning the under-recording of exports, and which, apparently, the I.M.F. will accept as part of the target for 1969–70, this may now be attained, but I draw the attention of the House to the cost of all this, which is prodigious.
This Bill is the sixth successive deflationary Measure which this Government have introduced since devaluation


in 1967, and the total effect of these deflationary steps, either in cutting the level of public expenditure, in tightening credit restrictions, or in raising higher taxation—this Budget is designed to increase revenue by £340 million in a full year—has been to take out of the domestic economy, in one form or another, £2,500 million over the past 18 months.
Moreover, the effect of this on the rate of economic expansion has been such that, in the current financial year, we shall be roughly £1,000 million down, taking the gross domestic product at 1958 factor cost, than if we went for a higher and more sustained rate of economic growth, of 6 per cent. per annum, which the country could attain if we are prepared to take steps to protect the balance of payments. The effect of this, taking this year and next year combined, is roughly £3,000 million.
If we go further back and look at the position since 1966, since the deflationary measures of 20th July of that year, and compare the rate of economic growth attained between 1966 and 1969, add to that the estimated rate of economic growth this year and next and compare this figure with the National Plan forecast for 1966–68, plus the T.U.C.'s economic review forecast for 1969 and 1970 together, we find that over the five years in question the country will lose something like £6,500 million in lost national output as a consequence of all the deflationary steps taken over the past three years or so.
This Bill is the culmination of all that. The effect for the British economy has been that in the 1970s we shall have not only all the problems of funding the short-term debt which we have incurred in recent years, but the problems thrown up by the policy of low economic growth. The effect of this on long-term investment on imports and on the level of unemployment will, I think, be extremely serious.
Having said this about the general economic background to the Finance Bill, I should like to make one or two comments about some of the principles embodied in its Clauses. There is, I think, a clear and growing tendency on the part of the Government to regard increases in indirect taxation as being more politically acceptable than increases in direct taxation in one form or an-

other. I think this is undesirable. I am not saying that all indirect taxation is wrong. What I am saying is that when we are faced with a situation in which people on average weekly earnings are paying roughly 20 per cent of their total household income in indirect taxation and, according to a recent article in the Treasury's Economic Trends, people earning £3,104 and above pay 17 per cent. of their total household income in indirect taxation, we have to have a regard to social equality.
I do not believe that there is any further justification for the sort of increases in indirect taxation contained, for example, in purchase tax and, in some respects, in selective employment tax in the Bill.

Mr. John Biffen: When the hon. Member refers to household income, is that income net of direct taxation and national insurance contributions?

Mr. Dickens: I am quoting from Table E in the article in Economic Trends for February last, which produces figures of the effect of indirect taxation on household incomes as a percentage of income after direct taxation and welfare benefits. This shows the position that in 1967—and the position has worsened since then, relatively speaking—people on average weekly earnings were spending roughly 20 per cent. of income in indirect taxation whereas those on £3,104 and above were spending 17 per cent. of their income in indirect taxation.
It is clear that a wide range of items on which purchase tax is payable bear very heavily on the lower-paid in our community. I hope we should aim at the abolition of purchase tax on all essential household goods, for example, in the lower and medium ranges.
If one argues that case, and if it is argued, as, for example, hon. Members opposite are likely to argue during this debate, that we should review the incidence of S.E.T., one is bound to postulate what the alternatives are for the Government in broadening the tax base. My right hon. Friend the Chancellor has taken steps, both in the present Bill and in last year's Bill, to seek to do this. In 1968 we had the special contribution, which was a step in the right direction. I submit, however, that we should be


looking increasingly at taxation on capital as to one source of income.

Mr. Speaker: Order. We cannot amend the Bill at this stage. The hon. Member may denounce what is in it. He must not suggest that other things should be in it.

Mr. Dickens: I leave it at that, Mr. Speaker. I simply make the point in passing that in the Finance Bill which the House considered in 1939, 30 years ago, taxation on capital raised roughly 8 per cent. of all the revenue derived through that Bill which Sir John Simon presented to the House. Today, the proportion is 4 per cent. There is obviously considerable room for improvement here.
I turn next to what I regard as the Chancellor's correct step in raising the exemption level for estate duty to £10,000. I hope that in the course of future Finance Bills, we will be able to raise this level still further. I very much believe that one of the great defects of our tax system and our tax structure generally is that we spend far too much time trying to collect comparatively small amounts of money from far too many people. This applies not only to the level of estate duty, but also to the level of income tax.
I am glad that in this year's Budget my right hon. Friend was able to raise the lower levels in both those respects. I look forward to further developments in this direction. I hope, too, that we shall be able to increase the incidence of estate duty at the higher levels to take account of the massive capital accumulation in recent years.
I think that the effect of this year's Finance Bill will be to the country's long-term detriment. I have no doubt that my right hon. Friend will find, in the course of the current financial year, that he will obtain a balance of payments surplus of between £200 million and £300 million. If he is seeking to do that, he must bear in mind the long-term consequences of this. Those consequences are as I have described them. I was powerfully reinforced by the arguments of my right hon. Friend the Financial Secretary in recent speeches which he has made outside the House, where he has argued for the funding of the country's short-term debt and not for its re-

payment, in part at least, from Budget surpluses.
Having made those few comments, I fear I cannot give the Bill a welcome. I have criticised it in accordance with the Rules of Order. I hope that in the course of the next 12 months the Government will change to an economic policy which will put economic growth, full employment and a higher level of investment before a bookkeeping surplus in the balance of payments.

12.9 p.m.

Sir Cyril Osborne: You said a few moments ago, Mr. Speaker, that the hon. Member for Lewisham, West (Mr. Dickens) could denounce what was in the Bill.

Mr. Speaker: That is a statement of a very obvious truth on Third Reading.

Sir C. Osborne: To cover myself, that was what I proposed to do.
Your other instruction to us, Mr. Speaker, was that we should have short speeches. I thought that this debate could run until 4 o'clock, and since this is—

Mr. Biffen: Some of us have to catch trains.

Mr. Speaker: Order. The hon. Member for Louth (Sir C. Osborne) is not getting many murmurs of approval from those around him who also want to speak. It is true that the hon. Member himself could speak until 4 o'clock. All I was pointing out was that other hon. Members wanted to speak.

Sir C. Osborne: In justification of what I would like to do, I regard this as the most important Bill of the year. It touches the ordinary people in their pockets at home, in every family, more than any other Bill. Therefore, discussion within reason should not be curtailed.
My complaint is this. First, I would like to vote against the Bill. My constituents do not understand a good deal of the hifalutin argument that goes on in this Chamber, but they certainly understand the taxes they have to pay. They regard this Finance Bill as imposing upon them the greatest burden of taxation which they have ever had to bear in war or in peace. On their behalf I protest against these enormous taxes which are


being imposed by the Government on the ordinary people whom I have the honour to represent. [Interruption.] My people would not take very kindly to that sneer.
The total burden being imposed by this Bill amounted to £14,464 million, last year under the finance legislation it came to £12,888 million. So that there is an increase in this Finance Bill as compared with last year of £1,576 million. These are colossal figures, and when looked at in terms of the tiny items which people have to buy in grocery shops, drapery shops, and so on, it hurts the people who have to pay.
If I may give the House a few figures, the last Tory finance budget in the year 1963–64 totalled £6,649 million—far less than half the figure now being imposed by the Government. In the 1964 Budget the figure amounted to £7,070 million. It is costing the taxpayer of this country twice as much in taxes to live under a Labour Government as it did under the Tory Government. My constituents would like to see the good old Tory days back again when taxes were not so high. I am entitled to make this protest on their behalf.
The heaviest Finance Bill even during the war in 1944–45 was only £3,135 million. The nation fought a war against Hitler and also met its civilian requirements on a sum only a quarter of the figure the Government are now extracting from the pockets of ordinary people. Today we have nothing more to fight, our three fighting services have been reduced to skeletons. But this Government are taxing the ordinary people by these colossal sums and people feel that money is being wasted and they are not getting value for what is being taken away from them.
What makes it worse for the ordinary people is that they read in the Press all the time that even these large sums are not enough and that we have to keep on borrowing from abroad. They cannot understand it. Why is it all these colossal sums which are taken from the pockets of ordinary people do not meet our needs? What are the Government doing with the money?
To break down these sums so that ordinary people can understand them £14,464 million, which the Bill imposes

on them, represents about £40 million every day—Saturday, Sundays, Bank Holidays, Good Friday and Christmas Day. It is a colossal burden. Instead of arguing all the niceties of taxation, we are saying that this tax should be reduced. We want it down very considerably. The people I represent hate paying taxes, they hate this Government for imposing so many heavy taxes upon them, and they will be glad to get rid of this Government on that ground alone.
It is said from time to time from the Government Benches, "But these taxes are not that great. Other nations are taxed more heavily than we are." The people in my constituency do not believe this. Even if it were true, it is no comfort to them when they have to pay their taxes to be told that other people are taxed more heavily than we are. They argue that these taxes, which they abhor, should be reduced. I deeply regret that we are not able today to vote against the Bill. I regret that this stage is now taken as a formality.
I should like to give one or two examples affecting ordinary people. Let us take the duty on spirits, beer and tobacco. Although no increase is contained in this Bill, it consolidates the 10 per cent. increase which was imposed last November so that it is relevant that we should discuss it now. Under the last Tory Finance Act the tobacco duty was £3 17s.1½d.; last year it went up to £4 11s. 8½d.; and this year by this Bill it is up to £5 0s. 10d. That means that every time the ordinary man or woman buys a packet of cigarettes today he or she is paying 4s. 9d., as against 4s. 4d. last year, and 3s. 8½d. under the Tories. It was bad enough then, but 4s. 9d. is a monstrous amount of tax.
Every time a man or woman smokes a cigarette he or she is paying nearly 3d. in tax. It is a wonder they do not "chuck its". Again I protest on their behalf. After all this is what the House of Commons is for, to protest on behalf of our constituents, especially when we have such an incompetent Government. The total tobacco tax under this Bill amounts to £1,125 million—a colossal sum. Last year it was £1,105 million, and in 1964 under the Conservatives £982 million. It is an enormous increase over that period of time.
Let us take the whisky drinkers as a further example. They have no idea how much they are having to pay. [An HON. MEMBER: "The hon. Member can say that again!"] The duty on a bottle of whisky today is 44s.; last year it was 40s.; under the Conservatives it was 30s. I am not an expert in these matters, but I am told that there are 16 "doubles" to a bottle of whisky. This means that every "double" costs nearly 3s. in duty. It is almost like drinking gold. It is quite extraordinary. If the ordinary people realise this they would revolt as I am sure they will at the next General Election. It will not be because of international considerations, but because of these things that touch their pockets. This is what will cause them to turn this Government out.
A great deal more wine is now being drunk in this country. The duty on light wine under the Conservative Government was 2s. 6½d. per bottle; last year it was 4s. 3d; now under this Bill it will be 5s. 4½d. On heavy wine the duty in 1964 was 5s. 1d.; in 1968 8s. 3½d; and today it is 9s. 0½d.
I come lastly to the working man's beer—the one thing he claims as his luxury. In 1964 the duty under the Tories was 8·4 pence a pint; last year 10·3 pence and this year it will be 11·3 pence under the Bill. The working man is paying nearly a shilling duty to a Socialist Government every time he has a pint of beer. By heaven, they will vote against the Socialists on that! I am telling you that!
That is the side of the Finance Bill that the ordinary man in the street will understand. He may not have been able to understand the high falutin arguments we have had so far, but he understands this, because it affects his pocket. The total tax on spirits, wines and beer under the Bill is £844 million. That is a tidy increase on last year, when it was £778 million. In 1964, under the Conservatives, it was £576 million. Now people are saying "How much higher is it going?"
My last example is petrol. The motor car is no longer the rich man's luxury. Anyone who employs a large number of people in a factory knows that the first thing he must do is to provide a car park for the workers to bring their cars. They

come either singly, or club together to get to work. In 1964 the petrol duty was 2s. 9d. per gallon. Last year it was 4s. 4d. Under the Bill it is 4s. 6d. The total duty in respect of hydrocarbon oils and petrol in 1964 was £674 million. Last year, it was £1,123 million. This year, under the Bill, it is £1,309 million. These are colossal figures for the ordinary people to have to find. They hate paying these sums, and they would like to be rid of the Government who impose them upon them.
The other thing that affects the ordinary people is purchase tax. The range of purchase tax five years ago was from 10 per cent to 25 per cent. It has now been increased to 13¾ per cent. to 55 per cent. Under this heading I remind the House that the Chancellor tried to slip through unnoticed in his Budget Speech the new tax on textiles, soft furnishings, tissues, sewing threads and knitting wools. Only next day was it discovered that that tax would be imposed. That tax affects the poorest of our housewives. It is a disgrace that such a tax should be imposed upon poor people and that this House should make no protest about it and cannot vote against it. I am utterly against it.

Mr. Nott: We did vote against it.

Sir C. Osborne: Not today. It is today that I want to vote against it.

Mr. Nott: Why should you not do so?

Sir C. Osborne: Because we have not the leadership on our Front Bench. That is the reason. If three or four back benchers on this side vote against it it will look ridiculous—half a dozen votes against such an important Bill. I protest against this enormous taxation.
Finally, as a businessman I must say how much I oppose corporation tax, income tax and surtax. Taken together, in an extreme case where profits are all distributed, 84 per cent. would go in those three taxes. I go to Communist Russia quite a lot. There, the highest earnings attract income tax and surtax at the rate of 13 per cent.—and the Russians pay very high salaries to their top people. We impose a tax of 84 per cent. on our people. The 16 per cent. that is left for the businessman is not enough to encourage him to take risks


and do his best. This tax will help to destroy incentive and hinder the working of the economy.

Mr. Dickens: Is the hon. Gentleman arguing that our businessmen should migrate to the Soviet Union in order to take advantage of lower taxation?

Sir C. Osborne: There are one or two other considerations to bear in mind—but at least we should get away from a Socialist Government to a Government who believe in rewarding those who work hard. If I could take my liberties there as well—but that is a big "if". The Financial Secretary is a first-class businessman and he knows that this combined direct taxation is a great hindrance to an improvement in our economic position.
Like many other hon. Members, I receive an enormous number of letters from my constituents complaining about the effect of S.E.T. The little shopkeeper and businessman say, quite rightly, that between S.E.T., the high Bank Rate and the difficulty of obtaining bank overdrafts, they are being squeezed to death. Many of these small businessmen are being driven to the verge of bankruptcy. They complain quite justifiably that this Bill taxes them unreasonably. They ask for these taxes to be reduced. I am voicing their views. I wish that I could carry my vote with my voice.

12.26 p.m.

Mr. Robert Sheldon: Unlike the hon. Member for Louth (Sir C. Osborne) I do not believe that the importance of the Bill is due to its effect on the drink trade. I consider its importance to be due to the fact that it represents a fundamental change in our economic thinking, and gives voice to that new thinking. To me the importance of the Bill is the acceptance of a new principle—the principle of money supply. We see this in a number of Clauses. My right hon. Friend the Chief Secretary, both in Committee and on Report, introduced many principles. I do not wish to denigrate them; indeed, they had a great deal of sense, and they helped the understanding of many of the Clauses. But the principle of domestic credit expansion underlines the Clause on loan interest in particular as well as other aspects of the Bill.
One passage in the speech of my right hon. Friend the Chief Secretary on 15th

July shows this clearly. Speaking about the reason for introducing Clause 18 he said that:
the main argument put forward when the Chancellor announced these proposals is the demand effect, which was expected to be considerable. That was the major argument in the proposals, and we see no reason to change our views about that aspect."—[OFFICIAL REPORT, 15th July, 1969; Vol. 787, c. 481.]
We see this throughout the Bill. The question was how the Bill would reduce the amount of money available and would affect domestic credit expansion—how the principles enunciated in the May issue of Economic Trends could be brought into effect. I do not expect a change of this magnitude to be made, on so insufficient a basis, for such an important economic change-over. We know that domestic credit expansion omits anything to do with building societies, the vast debt of hire purchase and the vast increase in importance in finance houses. Under Clause 18 and other provisions the rôle of the finance houses will greatly increase, but all of this is outside the concept of D.C.E.
We see ourselves committed to a theory which we are not sure will work. Although the right hon. Member for Leeds, North-East (Sir K. Joseph) showed his approval of our ready acceptance of new economic theories and pointed out, by contrast, how slow we are to understand the importance of some of them, I suggest that that is not the real problem we face. The problem we have is our too ready acceptance of the latest economic theories and our failure to appreciate when, and the limits within which, they can he of use.
The Treasury should, of course, always take an interest in economic theory, but acceptance of any new theory should come after close examination of certain aspects of it and only then should it commit itself. We have seen an extension beyond this. We have seen that the Government are prepared to accept a precise evaluation in advance not only of a full understanding of the theory but also in advance of the theory being worked out as it applies to this country.
I am grateful that the Bill has sent us back to our textbooks to find out what these theories are all about. The Bill is based fundamentally on the D.C.E. theory, and our acceptance of that theory


results from two major articles which appeared in I.M.F. staff papers. Polak in November, 1957, and Polak and Boisonneault in April, 1960, tried to show how the theory of credit expansion would work. They made some assumptions and tested them out in Latin America. They found that the theory worked quite well there; and that is fundamentally why we are committed to D.C.E.
They found that in certain Latin American countries there was a degree of constant velocity of money, and a similar assumption was made for Britain. This has been utterly misleading and if one studies Economic Trends one finds that the velocity of money has moved by between 2·5 per cent. and 3 per cent. I will not go into this matter technically, except to say that this movement can have an effect of hundreds of millions, if not thousands of millions of £s. What was acceptable for certain Latin American under-developed, very limited, small-scale economies cannot be transplanted on to one of the most highly sophisticated financial centres of the world. But this is exactly what has happened.
The absence of debate before acceptance of these proposals is to be deplored. Although I accept that there is some justification for D.C.E. in that taxation is not sufficient to reduce inflation, and that one must have some control over money supply, this attempt by the Government to quantify it and commit us excessively and with precision to the theory should not have been accepted so far in advance of the theory being widely tested and examined.
If one reads the articles by Polak one sees the crucial points which have become attractive to the I.M.F. and to certain elements in the British Treasury. I refer to "certain elements" because I do not think that the Treasury is fully convinced of the arguments. This is shown by an article in Economic Trends in which it is said, in a footnote concerning D.C.E.:
It should be noted, however, that given the size of money G.N.P., a change of 0.1 per cent."—
it has varied and the change has been as high as 0·5 per cent.
in the G.N.P. money supply multiple is at present arithmetically equivalent to a change of some £500 million in the money supply.

That is the theory to which we are committed, and are also committed to the I.M.F. The way in which this has formed a basis of the Bill has not been sufficiently examined, either in the House or elsewhere.
The Government and the I.M.F. have found the D.C.E. theory particularly interesting as it has applied to Latin America, which is the I.M.F. test bed where these theories are worked out because the Latin American countries are not only close to Washington but have a wide range of peculiar economies which can be examined in the way that a botanist likes to examine lush byways where all sorts of things are growing. They found in certain countries that there is a ratio between money supply and—

Mr. Speaker: Order. I hope that the hon. Gentleman will not pursue this Latin American argument too far.

Mr. Sheldon: I appreciate your ruling, Mr. Speaker, and I was merely attempting to point out the reasoning behind the Bill.
The ratio of money supply to imports is the crucial factor which they claim to have discovered. Naturally this is attractive to Her Majesty's Government, for if one can find a way of cutting down imports—which many people consider to be one of our most important tasks—that will mean that Eldorado is not too far away. It is more important than import quotas, but it is not as realistic. I will not develop the import quota argument, partly because I have adduced it on many occasions.
This was one of the most important reasons why the Government were attracted to the money supply and D.C.E. theories. Thus, under Clause 18 and elsewhere in the Bill they have tried desperately to cut down the volume of money available, simply because they were attracted to this theory.

Mr. Michael Alison: I suggest that the hon. Gentleman is not drawing a sufficiently clear distinction between D.C.E. and money supply. Is he aware of the point the Chancellor made; that if exports are increased one gets an increase in money supply? That is what the Government are trying to do.

Mr. Sheldon: I accept that D.C.E. is, in certain respects, more sophisticated than money supply, but the hon. Gentleman should appreciate that D.C.E. alone is a bit of a nonsense because it omits the factors of building societies, hire purchase and finance houses. The finance houses in particular comprise the sector where the great growth is coming; and to have omitted these elements—there are many others and I have mentioned only the most obvious—is to omit what is extremely important.
The result is that we have an imperfect theory imperfectly applied. In other words, we are compounding an error. Moreover, we are compounding an error which we cannot understand because it has not been worked out from the point of view of its application to this country.
There are two questions I wish to put to my right hon. Friend. First, what is the relationship between D.C.E. and the growth of the economy? Second, what is the rôle of D.C.E. in our economic policy? We must know how far we are committed to the new system and at which stage we pull out if the predictions are not fulfilled. At what stage do we pull out or reduce our dependence on the theory?
The Treasury have regarded themselves as being very modern in their outlook—and justifiably so, for there are some outstanding economists in the Treasury. But we should not give them ready approval for the way in which they have suddenly gone overboard for the latest theory without a full understanding of it. It needs further examination.
May I turn to a question which has arisen throughout the discussions on the Finance Bill—the difference between capital and income. We have faced this problem before and we shall face it increasingly every year, for it becomes more difficult as the ingenuity of various people is set to work to transmute income into capital. We see in the Bill, particularly in Clause 25, the latest episode in the continuing saga, and obviously it is not the last episode.
The trouble is that even with capital gains tax we are in a situation in which taxes on capital are utterly different from taxes on income. I recall the brave words spoken on the 1965 Finance Bill when the then Chancellor of the Ex-

chequer, the present Home Secretary, stated that what was important was to tax increases in wealth. He earned my whole-hearted approval, and I am sure that of many other hon. Members, for that statement, because this is the point to which taxation should be related—increases in wealth. The capital gains tax then introduced was a means of bridging the gap between profits made on capital and income. To me, as well as to almost everybody else, the two represent increases in wealth; whether wealth is increased by one means or by the other is irrelevant. What we then saw was a narrowing of the gap between the taxation of the one and the taxation of the other.
What we have seen recently has certainly not been a narrowing of the gap. Indeed, in some instances there has been a widening of it as people have been less and less prepared to accept the high taxation on income at marginal levels and have sought, with the help of their taxation advisers, means of paying the lower taxes on capital gains. That is one of the big changes. We have had a peculiar situation in that at a time when incomes have been rising all over the country, the yield in surtax has been falling—and it has been falling because people are not prepared to pay the marginal rate of tax of 18s. 3d. in the £on their income and instead have tried to find other ways of handling their money. We have had the flotation of companies by which people can make millions of pounds and pay tax at a rate of 30 per cent. without, of course, paying tax at the highest rate of 18s. 3d. in the £. That will continue.
I welcome the capital gains tax as a means of bridging the gap between the 91¼ per cent. rate of tan on income and the 30 per cent. rate on capital. I should like to see an increase in capital gains tax over a period of time and a reduction in the high levels of surtax to bring the two rates nearer to each other so that we do not face this problem again and again. Among the most important elements in the Finance Bill is that of trying to discourage the transfer of income to capital. So complex is the situation that over the long period the Inland Revenue would always be some paces behind those who advised new methods for transmuting income into capital.
I congratulate my right hon. Friends on the Treasury bench on the very great patience which they have shown to me and to many other hon. Members who have, perhaps, not been wholly satisfactory back-bench Members from the Government's point of view. They have shown us patience throughout our discussions. I also thank them for the changes which they have made. I think that they are right to call them concessions, in that they were changes in the considered and accepted view of the Front Bench, on Clause 18 in particular. There were a number of elements in Clause 18 which caused serious worry. My concern has not been completely put at rest, but the Government made genuine concessions for which I am thankful.
The Finance Bill is in rather better shape than at the beginning of our debates. I commend the method by which we conducted our affairs this year and look forward to the Bill going through the House as satisfactorily and as well next year.

12.45 p.m.

Sir Charles Mott-Radclyffe: I will not follow the hon. Member for Ashton-under-Lyne (Mr. Sheldon) very far in his interesting speech except to comment that he apparently discovered that those who have high earnings react violently against punitive taxation. Surely the first priority for any Chancellor of the Exchequer is to try to increase the nation's wealth in both the public and private sectors. Having done that, he can argue afterwards how to carve it up. To impose punitive taxation on the man of exceptional capacity three-quarters of the way up the ladder of his career seems a very unwise policy for any Chancellor of the Exchequer, of whichever party, to pursue. Nothing could have brought out more clearly the difference between our attitude and that of the Government than did the speech of the hon. Member for Ashton-under-Lyne.
I agree with my hon. Friend the Member for Worthing (Mr. Higgins) that this is a hastily drafted Finance Bill. It is one of the most hastily drafted Finance Bills I have seen since I have been in the House. Amendments have succeeded each other with almost kaleidoscopic rapidity and at times it was difficult to discover what was going on. Frequently

Amendments were tabled which appeared almost to cancel each other out, as we discovered in the late night sitting on Wednesday.
I was not a Member of the Standing Committee, but I read the reports of the debates in Committee and I have, of course, read the Clauses. I formed the impression that the Chancellor and his colleagues were like a crew on a ship in a very rough sea when most of the controls had been lost because of the gales. They did not agree about the port to which they were trying to steer and none of them knew how to set a compass.
The themes in the Finance Bill have, of course, gone overboard. First, there was the theme that there would be a restriction of credit. That was accompanied by the theme that at all costs the cost of living was to be held. The third theme was an attempt, not very successful, to bluff the I.M.F. There was an admirable phrase used by the Chancellor in the Budget debate about trying to simplify the tax system, but that proposal went into the wastepaper basket long ago.
As hon. Members know, I am not an expert in these matters, but it seems to me that if we want to restrict credit and to hold the cost of living, the last thing to do is to increase S.E.T. By increasing S.E.T. we are bound to increase the demand for credit, for the simple reason that the employer who pays increased S.E.T. on behalf of his employees is bound to ask for extra facilities from the bank to carry him over the intervening months before he gets a repayment—if he qualifies for a repayment. That is certainly the case in agriculture. Where the industry or the business does not qualify for repayment, the extra S.E.T. is passed on to the consumer, and that, in turn, results in increasing the cost of living in the various commodities in respect of which prices are raised. By the Clauses on loan interest, the Government have created a field day for the legal profession and the chartered accountants. I think that aspirin does not carry purchase tax but wet towels do, and these Clauses will bring in a fruitful yield of purchase tax in this respect from the professional societies.
One cannot draw a rigid line between an overdraft and a loan or mortgage, and if one tries one gets into a maze of


anomalies. Nothing more clearly brought this out than the very shallow and rather shabby answers which the Chief Secretary gave on the agricultural Amendments. It was clear that he did not understand the problem. If one finances maintenance from an overdraft on an agricultural estate—

Mr. Speaker: Order. We have had that debate, which I recollect, and we cannot have it again.

Sir C. Mott-Radclyffe: I am talking about what is in the Bill, Mr. Speaker. If one finances maintenance from an overdraft and improvements out of other capital, one gets no tax relief, but if one does it the other way around one is all right. On the repayment of a long-term mortgage by 1975, with perhaps 20 years to run, great upset will be caused, particularly for agriculture, which may result in the fragmentation of agricultural units—exactly what the Government say, in their next breath, that they are trying to avoid.
The Bill's whole attitude is negative. It does not create a single extra £ of weath. It only adds several hundred thousand man hours of unproductive work for the professional societies and for the Inland Revenue inspectors, in a kind of ghastly all-in wrestling match, trying to weave their way through a series of unintelligible, anomalous and ambiguous provisions.
It does not increase incentives and it discourages the investment of any risk capital. It has encouraged ingenuity in many undesirable ways. If one cannot save, one spends, which is inflationary, and if one cannot retain a reasonable amount of one's salary, the extra burden of responsibility on promotion is not worth it, and that is a very dangerous trend.
The Government have produced a situation over the last five years by which the black marketeer and the spiv are laughing but the man who has worked honestly and hard all his life now finds, on his retirement, that his savings have been eroded and his pension is inadequate. This is thoroughly undesirable, and the Government know it. The sooner that they put their policy into reverse or we succeed them, the better.

12.54 p.m.

Mr. Charles Fletcher-Cooke: The Chancellor gave us one of his optimistic speeches today. Whenever I hear them, my heart sinks to my boots. They are very effective—much more so than those which the right hon. Member for Belper (Mr. George Brown) used to make, because they are less ebullient—but, so far as they are effective, they are very dangerous. Today, we had another in the series. The right hon. Gentleman took great comfort from the fact—this is perhaps a reflection on the affairs of our times—that there was a fall in the new business which the finance houses were doing. I understand why, in the modern world, that is taken as a sign of success, but it is a pretty fair commentary on the state of affairs in which we are that it should be so.
Last year, the Chancellor predicted that domestic consumption, which must be his main consideration, consumer expenditure, would fall by 1·9 per cent., and, of course, it rose by 1·2 per cent. He expected that imports would rise by 0·6 per cent., whereas they rose by 7·9 per cent. I suggest, and indeed he suggested, that the Budget strategy was framed to prevent this happening again. We must ask ourselves whether this Bill will do better than the last Budget to secure this absolutely essential task.
Although exports are good, or much better than they have been, one cannot help feeling that we are going up against the ceiling in exports—not only in absolute terms, but also as regards the North American market, where we are clearly in some very choppy water. Therefore, all has to he concentrated on the question of reducing our imports and on reducing domestic consumption if we are to continue with the figures, which are not all that good, but are at least not as bad as they used to be.
On these very high figures for imports it is clear that the fiscal policy which has been adopted in previous Budgets has done nothing to meet the problem of domestic consumer expenditure. First of all, have these imports, which have risen so considerably in value, according to the recent trade figures, also risen in volume, or does it mean that the terms of trade are beginning to turn against us? If it is the latter, the strategy which was much attacked by


the only two Government back benchers who have spoken today cannot do any good at all.
Is it that the advantages which both this Government and its predecessor have had for 10 years, of cheap raw material prices, are beginning to change, and that we shall see—I believe that there are indications—that that advantage will soon be going? As a subsidiary point, has not the time come for us to dispense with the generosity by which, in the past, we have given prices well above the market prices to those who supply us with raw materials? The Chief Secretary will remember the article in a learned financial journal fairly recently, which showed that we pay for our raw materials far above the market rate under various international agreements.

Sir C. Osborne: Sugar, for instance.

Mr. Fletcher-Cooke: My hon. Friend mentions sugar and I believe that the same applies to copper. He has instanced the example of Canada, which pays almost half the price for her copper for her industries that we do, and there are various international agreements into which we entered in the days when we were flush. If we are to help the raw material producing countries, we should do it obviously and by means of the Ministry of Overseas Development, rather than conceal it in the trade figures in this way.

Mr. Speaker: Order. We cannot proceed to modify international agreements on the Third Reading of the Finance Bill. There may be some other opportunity.

Mr. Fletcher-Cooke: What I was hoping to do was to show that all the strategy of the Finance Bill is likely to be set at naught—because it is directed, and rightly directed towards reducing the import bill—if the terms of trade are moving against us. If so, the Government will have to find some means other than the fiscal weapon and the monetary weapon for doing that. I hope that they will do so urgently.
As to the two weapons which the Finance Bill uses, it is a pity that the Government have now really shot every single possible bolt in their locker, in the sense that we are using every theory

and not merely the theory that the hon. Member for Ashton-under-Lyne (Mr. Sheldon) so particularly suspected—that of restricting domestic credit. We are using that old fiscal weapon which has failed to work in the past, and there is really nothing else left. That being so, it seemed to me that the Chancellor's optimism today was even more misplaced than it has been in the past.
The Chancellor is quite frank about these things. He said that he did not need for expenditure purposes any of the additional money he is raising. In his Budget speech, he said:
The measures I have to propose are not called for by the very small growth in public expenditure. That could have been looked after quite comfortably by the natural buoyancy of the revenue."—[OFFICIAL REPORT, 15th April 1969; Vol. 781, c. 1004.]
This additional taxation, to which my hon. Friend the Member for Louth (Sir C. Osborne) so rightly objects, is not being used because the Government are spending the money on the social services or anything like that. But it is simply being used for what I hoped had become the exploded theory that by using the fiscal weapon and taxing people's expenditure unnecessarily we reduce demand.
The whole history of the last four years shows that that is not so; that the result of the reduction of incomes by high taxation, and particularly by S.E.T., merely produces irresistible wage demands. When one looks at the figures of successful wage demands over the last months it is quite clear that they have considerably outstripped any hope the Government might have of reducing consumer expenditure by means of the fiscal weapon. In spite of that, the fiscal weapon is still being used by the imposition of very heavy new taxes. Let me repeat, at the risk of boredom that merely, to use the old expression, to cream off excess purchasing power never has worked.

Sir C. Osborne: Cripps's mopping up.

Mr. Fletcher-Cooke: Mopping up—creaming off; whatever it may be.
This year, we have the additional weapon of Clauses 18 onwards in an attempt to reduce domestic credit and to reduce money supply. This is at least a novelty. The hon. Member for Ashton-under-Lyne thought that it was too much


of a novelty. He said that the Government did not know what they were doing, and had not thought it out; that it was a passing fashion derived from some visiting economists to South America, and would not be applicable to this country. I do not agree with him there so much. I think that in this case, although it is clumsily and inequitably done, the Government may be right. Anyhow, it is better than the old fiscal policy which has been proved year after year to be wrong.
My own view is that we should get back as soon as possible to the theory that Government revenue should be used to meet Government expenditure and not used for the mopping up process at all; that we should rely more and more on the monetary weapon to restrict consumer demand and, if necessary, take the consequences.
The Budget strategy as it emerges in the Bill is weak and variegated. It is variegated because it relies on too many weapons, and it is weak because it has abandoned any attempt to rely on the restraint of consumer demand through legislation in the sphere of labour. The one weapon which, in his Budget statement, the Chancellor said was the most important of all, has been lost, and sunk without trace, between 15th April and today. It would never, of course, have appeared in the Finance Bill so I cannot expatiate on the point, but such legislation was undoubtedly the weapon on which he placed most dramatic emphasis on 15th April. Where is it now? It has sunk beyond trace.
All we have now is the fiscal weapon, on which I do not rely because it has failed in the past, and a new essay into the monetary field. It is a feeble essay, because it does not deal with the institutions which the hon. Member for Ashton-under-Lyne listed and which are the great creators of credit. All it does is to hit at a few people who have been using their overdrafts more than the Chancellor likes. It is a very small essay into this field; as it stands, so small that I do not think that it will have the optimistic effect which the right hon. Gentleman once more has indicated it will have.
The Government are drifting into the use of higher and higher imports. In spite of the measures they are taking,

they are drifting once again into higher and higher consumer expenditure—in spite of some figures relating to the car trade which the Chancellor produced as an example that the squeeze was working. If that process goes on, the Government will eventually be driven, if they cannot take their courage into their hands over labour relations, to do what they do not want to do, what we do not want them to do and what the world does not want them to do but which will inevitably happen, and that is to impose import controls. They have made one little foray with import deposits, and we should like to know how those are working. But what they will be driven to is the sort of thing that most hon. Members would deplore. To judge from his earlier speech, the hon. Member for Lewisham, West (Mr. Dickens) might applaud import controls, but all right-thinking members would deplore them. That is where the Government will go unless they do something about the import bill, and I do not think that at present they know quite what to do or how to do it.

1.8 p.m.

Mr. Emlyn Hooson: I am very conscious of the fact that the speech I make will really be the speech that would have been made by my hon. Friend the Member for Colne Valley (Mr. Richard Wainwright). He was the sole Liberal member of the Committee, and made a very valuable contribution to its debates. He would have been glad to have been here today to speak on behalf of the Liberal Party, but is prevented from doing so by a longstanding constituency engagement.
This Bill is presented against a background of a tremendous backlog in our tax offices. It must be a matter of concern to all hon. Members that when we have this very complicated Bill we have, at the same time, evidence of an unprecedented scale of resignations in the overburdened top grades of the tax inspectorate. That being so, it is certain that this Bill can be guaranteed to add to the existing delay and chaos in the tax offices, and that must be a very serious matter for the whole country. A friend of mine, who is probably as skilled as anyone outside the Inland Revenue Department—and, perhaps, also inside it—is in despair over the structure of the


Bill and the burdens which it will add to those who have to advise on tax matters. It is a matter of great social concern, and should be for the country, that on an ever-increasing scale so many people are occupied full time in advising on tax matters.
It has been rightly said that the Government have been extremely accommodating to their critics over the Bill and have fulfilled promises made in Committee. That is right, but they had a great deal to be accommodating about. It must be unprecedented for a Government to have moved 87 new Clauses in Committee and on Report to have six long Government new Clauses and 129 Government Amendments. That shows that the Bill was originally presented in a thoroughly undigested form. The Bill's main provisions, whether they were right or wrong in intent, are classic illustrations of the mess which results from inadequate prior consultation.
It is necessary for the whole House to consider whether there ought to be a Select Committee to deal with the impending provisions of a Finance Bill before they are presented so that we could have adequate prior consultations and not get into the mess the Government have been in throughout discussions on this Bill. It seems the oddest way of going about things to have provisions in the Bill for S.E.T. increases without the Government even waiting for their own Reddaway Committee's Report on the structure and changes of selective employment tax.
Although the Government have given way greatly, and rightly, on provisions for disallowance of loan interest as a deduction from income, we and the country are left with a very considerable mess, and that one of extreme complexity. Enough thought had not been given, and still has not been given, by the Treasury Department to these very important provisions which will so change business habits in the country in future.
It seems that considerable improvements have been achieved by amendment in the provisions for catching sales of income from personal activities in return for capital sums to avoid the manifest unfairness which would have resulted from the earlier drafting. The first provisions had to be hastily withdrawn

and I grant that they are now much less offensive, but this again shows the inadequate consideration given to many aspects of the Bill before it was presented.
Then there has been the last-moment improvement regarding Clauses 30 and 31 with reference to the new estate duty on discretionary trusts. Otherwise executors and trustees would be involved in impossible feats of memory. The Revenue would have had quite arbitrary powers. This has been a last-minute change; a change which is welcome nevertheless. It underlines the great concern of the majority of rather detached people who perhaps had expected to see a change in Government intent or strategy on the financial side but who have been greatly dismayed at the apparent lack of adequate consideration given by the Government to the effect of the changes. Professional people have been dismayed by the apparent incompetence and the tax Bar has been greatly concerned. The Chief Secretary's profession, the accountants, have been greatly concerned about the lack of consultation on these matters.
With the new provisions for betterment levy on land transaction, how can even experts comprehend these changes? I am not an expert, but I am told by those who are experts that these provisions are very difficult to comprehend and it is difficult at the moment to estimate what the effects of the provisions will be.
So we end with a Bill which has been greatly changed and modified. The team at the Treasury have shown a welcome attitude towards their critics and everyone has been grateful for that. We are still left with a Bill of which very few people can estimate what its consequences will be. It imposes a vastly increased strain on the already over-taxed departments. It is a Bill which, if there was to be a Division, I certainly would vote against on Third Reading.

1.15 p.m.

Mr. David Howell: I confess that of the speeches we have had so far in this debate the one to which I was most attracted was that by my hon. Friend the Member for Louth (Sir C. Osborne), who has now gone to lunch but who told us that he will come back.
Although he would be the first to recognise that his speech did not attempt


to grapple with the complexities of money supply or domestic credit expansion, it reflected with a sort of salty tang the realities of incompetent finance, incompetent economic policy and poor financial legislation as they impinge on ordinary citizens. His speech was a graphic protest at the way in which taxation is rising. It was a protest which my constituents would certainly echo.
I know it is said again and again that in general terms and taking a global figure, compared with other countries taxation here is not too high, but in the minds of those who say that there should be at least a question mark to why that is so. There is a very general feeling in this country of widespread protest at the way in which taxes are levied and paid. This Finance Bill, if it does no more, will stand as an answer to that query, an answer simply given by noting that it is a Bill of labyrinthine complexity but yet of only marginal relevance to the economic problems we face.
I have not had the pleasure of attending all the debates on the Bill. I am told that some of the debates could not be exactly described as a pleasure in Committee. What is clear is that at every point from the beginning to Third Reading it is the almost suffocating complexity and complications being introduced into legislation by the reforms proposed by the Government which have been the chief feature. The plea for simplification is not one which arises merely from a desire to have everything neat and tidy, because behind that plea lies also the plea for administrative reform. One cannot follow without the other.
Unless we move in the direction of tax reform and go towards a much more simplified system based much more squarely on the one hand on direct income and personal tax and transactions with the State and, on the other, consolidation of indirect taxes into something like value-added, we cannot begin thinking about the crucial question of reform of administration of taxation. With complicated and varied rates and the vast range of different levels of assessment, with a situation in which very few citizens are in a position to assess their own tax liability or even their taxable income; we have a situation in which no electronics machine however subtly designed, can come to

grips with the varieties and levels of taxation and thus the reform of the administrative system of tax collection simply cannot be tackled.
I can only succumb to the temptation to repeat at this point that we must look in tax reform to the staggering comparisons between our staff requirements in tax collection and those in the United States.
We must note that in the United States a staff of about the same size as the staff of the Inland Revenue here—that is, headquarters and branches throughout the United States—managers to collect ten times as much Revenue and manages not only to collect revenue on the income tax side, but to do also Customs and Excise work, which occupies another enormous department over here, whose work will be greatly multiplied by the Bill. The American staff manage to do this, I think I am right in saying, in dollar terms, at slightly under three times the cost of the Inland Revenue budget but only about twice the budget of the Inland Revenue and the Customs and Excise combined. Those figures are a sobering comparison from which to start in understanding the desperate need to go for simplification rather than complication as the Bill has done.
I should like to say a word on the two aspects, touched on by the Chancellor, of effects on the home economy and effects on the external side. As my hon. Friends have said, there is no point of contact in the Bill—this is no new feature—with the key problem of the British economy, the slow, inadequate rate of wealth creation. There is no point of contact, except of a negative kind, with the need to encourage the accumulation of wealth, to stimulate innovation and to bring the young management cadre, which exists and has great ability, into the position where it can apply all its abilities and its capacity to innovation and investment in new processes techniques and methods.
The only negative point of contact is in Clause 18, where, as a result of a lot of to-ing and fro-ing, as a result of the complex Amendments introduced by the Government, the one certain fact is that men and women who would like to buy a small share in some way in the enterprise in which they are involved—by "small" one means much less than 5


per cent., unless it is a very small concern—are to be further penalised. This, the one negative point of contact with the process of innovation in the economy hits it sharply on the head.
The second point where the important effect on the home economy needs to be noted arises from the question of the size and level of public spending and the contribution which it makes to demand and to the Chancellor's calculations. There is something of a mystery, or, perhaps, a misunderstanding, here about what we mean by the level of public spending being too high.
The Chief Secretary is wont to say that it is under control and on target. He has said so many times. It is true that if one is a money supply fanatic and thinks entirely in terms of credit expansion, the level of public expenditure is under control in the sense that as a result of zero borrowing requirement and repayment by the Government, the level of public expenditure is under control in not aggravating the money supply problem. That, however, is not what one necessarily means in saying that public expenditure is too high.
It is an interesting but rather irrelevant fact that the level of public expenditure is such that it is all covered by taxation. The proposition that my hon. Friends and I have advanced, and will continue to advance, is that the level of public expenditure as a percentage of gross national product and the size of the public sector which gives rise to decisions which generate public spending is far too big. Not only is it too big, but, despite the assurances about slow 1 per cent. growth rates, and so on, there is fairly clear evidence that it is beginning to creep up again.
There is fairly clear evidence that the inevitable lack of proper management control and data about the cost of Government activities is leading to the inexorable bubbling upwards in the cost of Government activities which pushes the Estimates up and up. The signs are all there. If the signs are not enough on the Whitehall front, we hear at the same time rather sinister noises from Transport House about the new plans for increasing public expenditure still more rapidly in the near future should the

party which have its headquarters there get the chance.
The public sector side of the demand calculation and the contribution that the appetite of the public sector makes to the overall strategy towards economic stability is far from being settled by our being told by the Chief Secretary that the matter is under control. It is under control only if one thinks entirely in money supply terms. While it is right that we should, perhaps, be more concerned with money supply questions than were the economic policy thinkers and debaters a few years back, the formal doctrinaire approach to the problem—the import from Chicago—is not one of my favourite United States imports. We should be wary and aware of the need to temper these highly formalised theories which have been tried out in laboratory conditions and which simply do not exist in an economy of the kind in which we live. We should be wary of adopting them too readily and rapidly and be careful to modify them and mix them in with other factors which are having an influence.
I conclude on the public sector side by saying that the claim that it is all under control and that we need not worry is a conjuring trick, a diversion or sleight of hand which hypnotises those who think only in terms of money supply. The public sector is not under control. It is too big and it is increasing once again at a rate which is under nobody's control.
I very much doubt whether it will be brought under control again until we have two things. One is a Government who are prepared to question the whole range of Government activities which are now carried on with a view to stopping them or transferring them from the public to the private sector. The second requirement is a change in the form of financial planning and control, at present operating in our Whitehall system, of a kind which will begin to provide, possibly inside the Treasury or alongside it, the sort of Bureau of the Budget mechanism which is familiar in the American Federal Government and which would provide the degree of control over the real costs of Government activities which we simply do not at present possess. It is that kind of Treasury reform of a radical kind towards which the minds of those who wish to


bring the public sector again under control should be turning.
The Chancellor's most frequent reference on the overseas side was to the marvellous way in which invisibles have performed. The Government have made a tremendous discovery about what goes on in invisibles. Every speech now is larded with much-deserved praise for the performance of this part of the private sector. This is all very encouraging, because it shows that the dangerously wrong-slanted emphasis which Government spokesmen seemed to be giving in the past to the balance of payments and the way in which they appeared to see the problem is now giving way to a more realistic understanding of the balance of payment components which matter and which do not matter and take us away from the obsession which Treasury Ministers at one time seemed to have with the narrow export/import balance.
I do not know whether this has yet come across the Chief Secretary's desk, but I see that the Committee on Invisibles has commissioned a study on world invisible trade, a copy of which reached me this morning. A very interesting table—admittedly, the figures are only up to 1966—gives an enormous list of the balance of trade, invisible and visible, of 31 countries during that year.
No. 1 by far on the list is the United States. No. 2 is Italy and No. 3, just by a short head, is the United Kingdom in a list of the 31 leading economies. This is the balance of invisible and visible trade added together. This highly favourable position for Britain arises from the enormous balance of invisible trade. If there is an economic miracle in the making it is that despite this very favourable situation and despite the fantastic performance of the commercial sector and the vast strength and buoyancy of our invisible earnings, there has, nevertheless, persisted an atmosphere of no confidence and doubt about the British economy. What this shows is that if we are worried as to why the British economy seems such a poor investment, and why it has become such an object of derision around the world, the answer is not to be found by blaming the basic ability and energies of the commercial sector, or the merchandising sector of the economy. The miracle is that these sectors have performed so marvellously well, despite the aura of

gloom and doom and the persistent clobbering of management by the Government of this country, and despite the attempt to enlarge and build upon the tax base provided by the selective employment tax legislation which, of course, discriminates against the service sector from which most invisible earnings spring.
This, again, is a strong argument—the strongest of all, in a way—why we must move on from the consolidation of S.E.T. as embodied in the Finance Bill, to the kind of indirect taxation which allows remission for exports and points the way to a tax on value added. I should like to know what addition to the revenue the proposals to extend S.E.T. to the nationalised industries will bring. I share the views of my hon. Friend the Member for Worthing (Mr. Higgins). This seems an odd way in which to spring this proposal on the House and on the public. But I suppose it would be churlish not to recognise that at least it evens out a grossly unfair situation which existed beforehand in regard to competition between private retailers of electrical equipment, gas appliances and so on, and the nationalised industries. At least that is remedied and, although we have not had a chance to discuss it, it would be nice to know what addition to the revenue that will lead to.
The point about the balance of paymants side of the equation is that, because of the past obsession with current visible trade, there has been this danger that somehow everything must be solved by urging people to export more and by preventing people from importing, and that the real issues, the real components of the balance of payments about which we should be worried, get neglected. The most fundamental issue, and the one which the Finance Bill understandably neglects, is the problem of external exchange rates and the movement throughout the financial world towards the realisation that we shall have to come to some system of managed rates, and the danger in believing that we do not have to face that issue. The real danger is that this problem, if neglected, will lead to a settlement of the world's exchange rate difficulties between the United States and Germany over our heads, and will place us in a position where our action finally has to spring from other people's views and decisions


which may be even more painful than many of the remedies already applied.
Having sounded thoroughly critical, and feeling thoroughly critical, in protesting about the approach behind this Bill, I confess that as one goes around the country things are certainly not all black. The ability is there. The energy and readiness to go ahead on new designs, new investments and new methods is there. The ability to apply vast ingenuity to further expansion on invisibles and to provide the world with an even larger proportion of the total invisible earnings than the United Kingdom does already, is there. It is rather like the workers of Hamburg or Hanoi after the bombing. The able people of England creep out from the rubble of Government incompetence and go about their work.
But, of course, this is the tragedy. It is unnecessary. It could be transformed by an entirely different tax framework and an entirely different attitude of central government policy which would restore the greatness, viability and richness of this country.

1.35 p.m.

Mr. John Nott: I should like to begin with a short quotation from Blackstone, because it seems to me to be appropriate both to the contents and the handling of this Finance Bill during the current year. In his commentaries, which in their time were the favourite reading of the British public, Blackstone claimed that
No subject of England can be constrained to pay any aids or taxes even for the defence of the realm or for the support of the Government but such as are imposed by his own consent or that of his representatives in Parliament.
My first comment is that this constitutional principle which has stood the test of time has, to my mind, been eroded further during the proceedings on this Bill.
I should like to comment on the Chancellor's remark that, in his view, the revised procedure—referring to the procedure of dealing with the Bill this year—has been generally considered as an improvement. Although the procedure this year was an experiment, and we all recognise it has having been worth while as such, I think that the method of

splitting the Bill into two halves and not requiring the author of the Bill to answer in Committee and in detail for his measures, has diluted the capacity of hon. Members to speak their part, and has also lightened the constitutional obligation upon the Executive to answer in detail and in substance for their taxing of the subject. Parliament and its procedures are more important than the convenience of the great. I make that remark without any heat but just in passing.
I also make no criticism of the Chief Secretary, who at all times has been courteous and fair—sometimes in the face of provocation, perhaps, from hon. Members like myself—and I can assure him that those who are new to this House admire very much the way in which he has managed to steer a vast Bill through the House. We do not agree with what he says and there is, of course, a great unbridgable gulf which exists between his philosophy and my own. Nevertheless, he has been courteous and fair, and I wanted to say that in my opening remarks.
I make no criticism either of my right hon. Friends because I think they were right to agree to a very useful experiment this year in taking the Finance Bill in a different way. It was a useful experiment. As for my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod), he has sat through every speech on Second Reading, in Committee, on Report and Third Reading, and I know that my hon. Friend the Member for Acton (Mr. Kenneth Baker) and all those who served on the Committee admire him very much for the way in which he has listened intentively to every word that has been spoken on the Bill. It contrasts, I am afraid, rather strangely with the attitude of the Chancellor.
If we take this Finance Bill in this way and we split it once again—I am not saying that I am against the procedure that we adopted; I make this point for my right hon. Friend—I think we need to have a larger Committee than we had this year. Taxation is not only a matter for the so-called experts, even on the arbitrarily chosen technical subjects of the Bill. It is a subject for those more normal and, perhaps, more admirable souls who can give a judgment as to its comprehension to the ordinary man. Although my hon. Friend the Member


for Louth (Sir C. Osborne) is an expert in this field and many others, the Committee would have had great benefit from the type of speech which he made today on Third Reading. I do not believe in a Committee of experts upstairs considering the technical details of the Bill. Parliament should have a healthy scepticism towards the expert.
The failure to understand and the failure to discuss are two instances of the way in which the theoretical assent of the taxpayer through his representative in Parliament may be made unreal. My hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) on Second Reading, I think, referred to last year's proceedings on the Finance Bill as being rather like a magistrate's court in Calcutta 100 years ago. He had a valid point there, but I make the contrary remark that it was a feature of the British Raj that, although its quarters may have been over-heated and unduly cramped, it was nevertheless noted for its well ordered and conducted administration, and its justice which was seen to be done on every occasion.
My hon. Friend the Member for the Cities of London and Westminster (Mr. John Smith) is a director of one or two of our most important companies, but, because of the size of the Committee, he could not serve upon it. As a director of some of Britain's leading companies, he should have had the right to speak about corporation tax. Because we did not have a corporation tax debate on Report, however, his only opportunity was either on Second Reading or on Third Reading, neither of which is a really appropriate occasion to speak in detail about an increase in corporation tax. I make that point also in support of my view that the Committee should be widened.
I come now to the two measures which have been the most controversial, the Clauses concerning interest on borrowing and the anti-avoidance provisions of Clause 25. For £20 million to £25 million of additional revenue a year and a marginal reduction, perhaps, in the size of personal borrowing, the area of uncertainty in our tax system has been unnecessarily extended. The boundary between allowable and disallowable borrowing will choke the Revenue with work, with a further bad effect on the

Revenue's efficiency. Quite arbitrarily, business has been raised into a privileged position over the personal borrower. One type of individual borrower will be approved—for instance, the man raising a second mortgage on a new house—while another type of individual borrower—the man raising a second mortgage on his present house—wil not be allowed to offset his interest against taxation. Likewise, a loan for the purchase of shares in a close company will be allowable but not in a non-close company. A man will be deemed a privileged proprietor for borrowing purposes where he holds 5 per cent. of a close company but an unprivileged proprietor if he holds 4 per cent.
With all this muddle and the anomalies which are being put on the Statute Book, the two categories of person for whom one might expect from any Government a privilege rather than a discrimination, namely, the employee who wishes to buy, or who has already bought, a small stake in his own company and the holder of an insurance policy undertaken as a means of saving against old age, sickness or the education of his children or just to meet a rainy day, are specifically singled out for discrimination because they are inhibited from borrowing. It is the strangest notion, unintentional originally, perhaps, on the part of the Chancellor, which has led to these measures in the Bill which, on the face of them show a lack of foresight and preparedness.
Now, Clause 25 and, in particular, Amendment No. 204 inserted by the Government yesterday. The Amendment is in terms which give the Revenue the power to probe into a taxpayer's moral intentions when it says
(c) the main object, or one of the main objects, of the transaction or arrangements was the avoidance or reduction of liability to income tax.
The Chief Secretary told me that the Amendment's purpose is to safeguard the taxpayer. It is no such thing. The only reason for its insertion was that the Government found it essential because of the wide-ranging nature of the original Clause. An important point is raised here. Is it avoidance of tax or the Government's anti-avoidance measures which are the greater evil in this country? When I speak of avoidance of tax, I do not mean evasion. I am not referring to those who break the law.


I refer to avoidance, the arrangements made by those who legally conduct their tax affairs so as to reduce their liability to tax by the maximum amount.
The worst that can be said against avoidance of tax is that there are instances in which it offends against the spirit of the law even if not against the letter. But, since the Revenue presses home its demands according to the letter of the law and without regard to its spirit, the odds are fairly even on that score. The law reports are laden with cases in which the Revenue has pressed its case, against all equity, right up to the House of Lords. I cite Abbott v. Philbin and Inland Revenue v. Luke as two cases in which the Revenue pursued its point up to the House of Lords although one would not have thought that the spirit of the law was being transgressed.
The balance as between the Executive, the Inland Revenue and the taxpayer in this country is not right. I take the doctrine of discovery, which is closely relevant to the Bill. The law entitles an inspector of taxes, even where the taxpayer has made a full and accurate return, to make a new assessment even when he, the inspector, has failed to take note of a fact or a relevant proposition of the law. More and more, and notably in this Bill, the weight of legislation passed by the House is burdened against the taxpayer rather than set in his favour.
At best, anti-avoidance measures are a proper exercise of the power of the Legislature, but in practice, on the presumption that avoidance is inherently evil and the needs of the Revenue are paramount, anti-avoidance has become an instrument for the erosion of the law. This ought to be noted by the House.
Although he is not a popular man, the avoider of tax, the man who legally so arranges his tax affairs to reduce his liability is under our Constitution an upholder of the rule of law. I think that the Financial Secretary will understand my point. I am referring to the tax avoider, not the evader. He upholds the rule of law, arranging his tax affairs by the strict letter of the law. Moreover, what he does underlines the policies of confiscation which we have been seeing in the past four years' Budgets, with taxation of people's incomes up to and

over 90 per cent., and last year over 100 per cent.
It is worth recalling Lord Clyde's judgment in the context of Clause 25:
No man is under the smallest obligation, moral or other, so to arrange his legal relations to his business or to his property as to enable the Inland Revenue to put the largest shovel into his stores.
That judgment is still the law of the land. Lord Atkin has said:
The subject, whether poor and humble or wealthy and noble, has the legal right so to dispose of his capital and income as to attract upon himself the least amount of tax.
That is the law of the land, and in proposing an Amendment yesterday which referred to the main object, or one of the main objects, of the transaction or arrangements being the avoidance or reduction of liability to income tax, the Chief Secretary went wholly contrary to that cardinal principle of our Constitution.
I come, finally, to the Chief Secretary's claim that every man has access to appeal to the courts. That sounds convincing, but it is less and less related to reality. I do not know whether the Financial Secretary can comment, but yesterday, quite by chance, I received a letter from a very reputable accountant in my constituency which said:
I understand that the Clerks to the General Commissioners for Income Tax have received a letter from the Chancellor of the Exchequer stating that they must make every endeavour to reduce the number of outstanding tax appeals. The General Commissioners are supposed to be an impartial body of men standing between the taxpayer and the Revenue, and if my information is correct, it would appear that the Chancellor is trying to unduly influence the Commissioners so that the statistics relating to income tax appeals for 1968 and 1969 can be improved.
I have put down a written Question to the Chancellor about this, but perhaps the Financial Secretary could say whether the Chancellor has sent such a letter to the Clerks to the Commissioners for Income Tax. This is a most important constitutional point.

The Financial Secretary to the Treasury (Mr. Harold Lever): Is this what I am being asked—has the Chancellor encouraged the Commissioners to deal as speedily as possible with outstanding appeals? Is that the gist of what has been said?

Mr. Nott: No, the allegation is being made—I have no means of knowing


whether it is true or not until I receive an answer to my Question—that a letter has gone from the Chancellor to the Clerks to the General Commissioners saying that they must make every endeavour to reduce the number of outstanding appeals—

Mr. Lever: It is the same point.

Mr. Nott: I think that it is a very different point and if the Financial Secretary—

Mr. Lever: Would the hon. Gentleman make it clear what he is complaining about? What does he think is improper in seeking to reduce the number of appeals? I am not quite clear.

Mr. Nott: If the hon. Gentleman is saying that all that is being asked is that the outstanding appeals should be hurried along, which was the point of his earlier intervention, and that the whole process should be speeded up, there is, of course, no objection to that. No, what I am saying is that, if the Chancellor is asking that the tax inspectors should try to persuade people not to go to appeal, then that, of course, is wholly wrong.

Mr. Lever: indicated dissent.

Mr. Nott: Well, if the hon. Gentleman can give an assurance, that is fine.
Under Section 28 of the 1960 Act, the Revenue can impose income tax without stating its grounds. The taxpayer may state his case, saying why he thinks that the Section does not apply to him, but only then does the Revenue state its case to the tribunal, the taxpayer has no right of reply, and the tribunal then adjudicates. This is the type of Measure which is going on the Statute book, so I do not accept the Chief Secretary's answer yesterday, that a man can simply go to appeal.
I should like to end with four questions relating to Clause 25, which have been asked in an excellent article in the British Tax Review by Mr. Monroe, one of our leading tax counsel. First,
Is the departmental ruling today an inevitable development alongside the departmental concession?".
Second,
Must fiscal legislation become so obscure that inevitably, the executive has a wide discretion as to its scope and operation?

Third,
Is the only practicable way to deal with tax avoidance to accept a curtailment of constitutional liberties?
I have referred to that, and I think that that is what is happening in Clause 25. Last,
'If a wider discretion in the executive is inevitable in the twentieth century, can the taxpayer be given more adequate opportunities to confront the executive, to ascertain his position and to plead his case?
My last quotation is another from Blackstone:
The third absolute right inherent in every Englishman is that of properly; which consists in the free use, enjoyment and disposal of all his acquisitions without any curtailment or diminution save only by the laws of the land.
I believe that it is in fiscal policy and in the type of legislation which we find in Clause 25 and in the wider and wider discretionary powers given to the executive and the Inland Revenue that the traditional liberties of the subject are being infringed.
I do not want to exaggerate the point, but it is a trend which we should speak up against. It is in conformity with the decline in the traditional freedoms of the subject, which is characterised also by the removal of passport rights from citizens under the Commonwealth Immigration Act and the removal of their rights to exercise their vote in the manner recommended by an impartial commission under the Parliamentary Redistribution of Seats Bill. I hope that, when my right hon. Friends come to power, they will reform and simplify the whole taxation system and, more important still, will create a system of detailed and open scrutiny of new taxation proposals, so that their application and its fairness may be studied before they are introduced.

1.57 p.m.

Mr. Hugh Jenkins: We have just heard two extremely interesting speeches from hon. Members opposite. It seems that hon. Members of the Conservative Party who have joined the House recently are even more traditional in their outlook than the older Members. The association which the hon. Member for St. Ives (Mr. Nott) drew between liberty and property is an extremely old Conservative doctrine. One understands that, for them, property is liberty and liberty is property, but to hear that


proposition enunciated so clearly in this debate by an hon. Member opposite is extremely interesting. We do not take that view, which stems from about 1645, at the time of the English Civil War.
My view about the Bill is that it fails further to intervene in the maldistribution of property. What needs to be done is that property should be more effectively distributed. I also criticise the Bill because it does not go far enough in tackling income redistribution.
The hon. Member for Guildford (Mr. David Howell) also made an interesting point, drawing a distinction between the American taxation system and our own. I have failed to discover, among my American acquaintances, that admiration for the American taxation system to which he gave voice. American citizens, staggering as they frequently are under state taxation, federal taxation and city taxation—all of them sometimes both direct and indirect—find complexity in their tax laws, and not the simplicity which the hon. Gentleman affected to discover.
The complexities of our system are for the purpose of creating greater fairness. I would look very carefully at any changes in the Bill which sought to give greater simplicity to our tax laws only at the cost of making them more unfair. There are two lacunae in the Bill, two points which I wish were in it but which are not there. One is the question of political contributions. I understand that it is not in order—

Mr. Deputy Speaker: Order. I think that the hon. Gentleman knows what the rule of order is on Third Reading.

Mr. Jenkins: I was about to say that it was not in order to say anything about the subject. It is, however, with your indulgence, Mr. Deputy-Speaker, proper for me to express a simple statement of regret that it is not there, and to pass straight on.
I understand that the reason is that it was not felt proper in a Finance Bill to deal with a matter which should properly be dealt with in a Companies Bill. However, there is reference in the Bill to selective employment tax. It is technically possible to introduce into the Bill references to selective employment tax, which

might be said to be properly referrable to the Selective Employment Payments Act rather than to this Bill. So in some circumstances it is proper to change a Bill by means of Clauses in a Finance Bill.
I welcome the changes which are being made with a view to making selective employment tax more selective. The great advantage that the selective employment tax has over the value-added tax which is so popular amongst hon. Members opposite but under which I hope that our citizens will never have to groan is that that tax is a bludgeon as compared with the selective employment tax, which could, if my hon. Friends chose to be a little more rapid about it, be shown to be a rapier, a tax which could be utilised very selectively.
I repeat that I welcome the steps which the Bill makes towards making selective employment tax more selective. In so far as the Bill fails to deal with the glaring anomaly of the maintenance of selective employment tax on theatres, I deplore it. I hope that it will be proper for my right hon. Friend the Financial Secretary to indicate that it is the Government's intention to proceed rapidly to rectify the other anomalies which are occurring in the implementation of the tax.
The Finance Bill is a Bill which, generally speaking, refines, furthers and maintains our present broad taxation system. It does not greatly improve it, nor does it worsen it to the degree that hon. Members opposite wish to do. To this extent I give a modicum of reserved congratulations to the Government.

2.3 p.m.

Mr. Kenneth Baker: I find the diffidence of the hon. Member for Putney (Mr. Hugh Jenkins) agreeable. He said in one throw-away line that there is a reference in the Bill to the selective employment tax. There certainly is: the Bill increases the burden of the tax by 28 per cent., as everybody who has to pay it has known from last week. The hon. Gentleman went on to call the tax a rapier. It is indeed a rapier: like the rapier, it has the effect of killing what would otherwise be useful activity. Like so many supporters of the selective employment tax on his own side of the House, as soon as it affects his own interests in his own industry the hon.


Gentleman throws up his arms in horror and says that his industry must have a rebate.

Mr. Hugh Jenkins: Is the hon. Gentleman defending the continued imposition of the tax on the theatre?

Mr. Baker: The attitude of my right hon. and hon. Friends to the tax is well known: we intend to abolish it at the first opportunity.
I am particularly worried about one aspect of the Bill that partially concerns selective employment tax. Under Clauses 44 and 45 relating to the tax, and under Clause 9 which concerns corporation tax, the penalty put upon business activity is about £200 million a year. In addition, although it is not part of the Bill, industry will have to bear a substantial extra burden from October as a result of the higher national insurance contributions.
This is very worrying, but it is all part of the Government's policy. I am sure that the effect will be depressant upon industrial activity later this year and early next year. I know from my own businesses and from my connections with colleagues and friends that people are concerned about the sluggish volume of trade in a wide variety of industries. If the Government live, they will live to regret this Budget and its strategy.
I turn now to the question of the legislative method used in the Bill. The Bill makes three major changes in our tax law. The first relates to the disallowance of interest, the next is the very complicated change in estate duty, and the third is the complicated series of changes in capital gains tax.
I know that these are technical matters, but they have a wide general effect. There will hardly be any person in Britain who will not feel some effect—a long, wide-reaching, ripple effect—from these three groups of tax changes. Yet we have devised a complicated and inefficient method of bringing in such changes. The Chancellor, in a ringing Budget speech, said that various things would be done in these areas. He was not present in Committee to hear the arguments as to how difficult it would be to implement the intentions within our tax laws. As a result, the Bill was badly drawn and it has been fundamentally changed on Report.
Last Friday and this Monday was the first opportunity that many of us had to study the fundamental and wide-ranging changes made in the Bill by the Government. We had little time to consider them. I have little doubt that these changes and new Clauses are as badly drafted and as confusing as the original parts of the Bill. The way in which they were introduced by Treasury Ministers on Tuesday and Wednesday was staggering. Ministers came as repentant sinners expecting the gratitude of the House for appeasing the hardship which they had previously inflicted.
I could not help recalling the words of Sydney Smith, the eighteenth century cleric:
The liberality of ministers"—
he said "churchmen"—
is like the content of matter in a cone. The higher they go the less it becomes.
The so-called concessions made by the Government are not very wide or deep. They are certainly inadequate. One lesson from the Bill is that when established tax procedures are to be changed, such as the disallowance of interest or the provisions relating to estate duty, it should be done by publishing a green paper first so that people can comment upon it; possibly a Select Committee should consider the proposed change. In that way we could get better tax laws and not the mess we have had this year.
Clause 18 is the most important Clause in the Bill. It introduces the principle of the disallowance of interest. I know that the Treasury was concerned to stop some very obvious abuses of this principle, but it cast its net so wide that it caught in its net, and will continue to catch in its net, many small and medium-sized people and businesses. The very rich will be able to evade the Clause. Suggestions have been made to me, not that I am very rich, as to how it can be done.
The whole effect of the Clause and of such legislation is to widen the gap between the very rich and the rest of us. The Financial Secretary, of all Ministers in this Government, appreciates the truth of what I am saying.
The basic difference between the Tory Party and the Labour Party is highlighted by Clause 18, because what justice can there be in a Clause which allows


somebody to borrow as much as he wants to build a swimming pool, to lay out a croquet lawn, or to establish a deer park, but does not allow a young executive to borrow money to buy a small stake in his business. This shows the difference between the attitude of the Labour Party and that of the Conservative Party. We are concerned with the creation of wealth and with oiling the wheels to create wealth. The Labour Party is not so concerned and is proud of it.
I believe the Treasury and Treasury Ministers are preoccupied with tax avoidance to the point of paranoia. The Clauses on tax avoidance in the Bill were debated for many hours, but the amount of money involved is very small. This continues the battle that goes on each year between a huge army of private accountants and a huge army of tax experts in the Treasury and the Inland Revenue. It is a battle without honour in which only wounds can be won and it is about time we decided upon a truce.
The Treasury Ministers should take their eyes from the small print and realise with a broader vision that a fundamental tax reform is needed in the country. The rulers of this country in Tudor times built mazes and hedges. We in our age build our maze with tax laws. In Tudor times mazes were an ingenious diversion. In this age they are an expensive and tiresome pursuit. The broad body of people in this country see a need for tax reform. Any Government or Party which offers the prospect of a reform will deserve well of the electorate and will do well by the country.

2.12 p.m.

Mr. Michael Alison: I wish to reinforce the eloquent and acid comments of my hon. Friend the Member for Acton (Mr. Kenneth Baker), particularly in regard to Clauses 18 and 19 of the Bill. The way in which the proposals of the Government on disallowance of interest on borrowed money have been handed out will go down in history as a classic example of how not to handle an admittedly difficult financial situation and how not to react to an emergency.
The sad and worrying thing is that they have played disallowance of interest as though it is some sort of tragi-

comedy, in the same way as the Government have acted over a whole range of other emergency situations which have arisen. The way in which they have reacted on this occasion reminds me most of all of their reaction to a different situation, the Anguilla crisis. It was a shot in the night.
The sudden realisation seemed to float across the Government's mind that the fact that people were borrowing for relief of taxation was the clue, the vital new discovery, as to how we could get out of all our economic difficulties. There is a sudden, massive over-reaction to a situation, a mobilisation of everything and everybody in one enormous gargantuan proposal to deal with the economy. The whole thing is followed by a clumsy, piecemeal, extravagant costly, and in some ways humiliating, withdrawal to a position into which they should never have got themselves in the first place.
This over-reaction, this panic measure, without any serious thought behind it, is seen most clearly when one works out the financial implications of the toing and froing of the Government over Clauses 18 and 19. One must remember that this year the net yield from these Clauses on disallowance of interest, as announced by the Chancellor of the Exchequer on 15th April, is £7 million and he said that it would be £25 million in a full year. But it is not the full year which is of relevance in the disallowance of interest. It is this present financial year in which the fight is to take place.
It is this financial year in which we are committed by the I.M.F. letter of intent to secure a surplus on balance of payments of £300 million. It is this financial year in which consumption has to be restricted and next year, the full year, in which £25 million might accrue is not strictly relevant in this context. Taking the full year involving £25 million as the estimated yield, one must take into account all the further offsets which will occur since public expenditure in this period is scheduled to increase quite considerably. This is a panic measure with all the subsequent ludicrous fiascos involved in withdrawals in all sorts of different sectors in order to produce an in-flow of £7 million.
The provision is all the more questionable when one recalls that on 15th July,


a few days ago, the Chief Secretary came to the House to announce concessions, part of the withdrawal from Anguilla, part of which will cut the yield of the disallowance of interest by £3 million. This is 50 per cent. of the figure which he hopes to obtain in the full year. Pro rata it reduces the total yield from £25 million to £12 million.
There could never have been an occasion when a serious and significant change has been proposed in our taxation system, involving major fiscal reforms, in which a concession has been advanced two days before Third Reading to cut by 50 per cent. the expected yield of this major change, which reduces inflow by £3 million. As we know from the Budget speech, this is only part of the story. The concession relates only to the concessions made in respect of estate duty and close companies.
The Chief Secretary explicitly stated that the concession he was making of £3 million did not include his proposals in relation to the five-year extension of bank lending and overdrafts. One does not know what the full concession may be. It could be as much as 50 or 75 per cent. of the precise yield. If that is the fact, what is the point of this whole proceeding?
The situation is made even more ludicrous when one considers the rational justification made by the Chief Secretary for this proposal and the series of concessions. In order to appreciate this matter, one must reflect on the extraordinarily bizarre transformation of the Chief Secretary from what one might call "fiscal practical man" into "philosophic man". The Financial Secretary may not be able to visualise the transformation of the Chief Secretary from practical man into pholosophic man. It is as if he were transformed from his normal grey suit into the garb of an astronaut, inflated suit, helmet and the rest. That is his philosophic guise and it is so ludicrous as to defy description.
The Chief Secretary, in his rôle as philosophic man, tried to justify this change in the taxation system by the distinction he drew between expenditure for business purposes and expenditure for personal purposes. I leave aside the fact that he immediately introduced into what at first sight was rational distinction a

colossal exception in regard to expenditure in connection with the acquisition or development of land straddling business and private expenditure, which therefore must be discounted. We must also discount the colossal exception to the exception that he made when, having allowed development and acquisition expenditure, he disallowed maintenance.
But we must allow the Chief Secretary, as philosophic man, to have this little distinction between business and personal expenditure. I hope that the Financial Secretary will appreciate how crazy this philosophy is if we work out its real implications. The Chief Secretary justifies the discrimination between business and personal expenditure, or expenditure by way of borrowing, on the ground that it was quite legitimate that personal borrowing of money should bear a differential rate of interest—a slightly higher rate. I am sure that the right hon. Gentleman will appreciate that the corollary to that is that we wish to encourage business expenditure by giving it a relatively lower rate of interest.
If we extend the logic and encourage rates of interest throughout the whole economy to drop—I am sure that the right hon. Gentleman would wish avidly to see the Bank Rate fall by ½ per cent. or 1 per cent. and to have a lower rate of interest to encourage businesses—we see the ludicrous nature of the Chief Secretary's differentiation.
Table No. 29 shows that the volume of bank advances outstanding to the end of March this year amounts to about £17,000 million. Let us imagine that the public were paying 10 per cent. on that, or £1,700 million. If we cut the rate of interest by 1 per cent. we should save the economy about £150 million.
The Government are making a massive sea-change of fiscal policy designed to produce less than £3 million in savings, and the logic behind it is the need to encourage investment in the business sector. This will almost certainly give a bonus to borrowers of every sort of probably over £100 million a year, in other words, ten or 15 times as much as is saved on this Measure. The whole thing is ludicrous. I cannot imagine why the Government do not scrap the whole thing and reintroduce at least a measure of sanity into the Bill.
At all times I found the Chief Secretary to be an extremely agreeable and lucid exponent of Government fiscal policy—in this I echo what was said by my hon. Friend the Member for St. Ives (Mr. Nott)—but he must not allow himself to be diverted into philosophic ways in trying to justify some of the nonsense that we have had in the Bill.

2.24 p.m.

Sir Henry d'Avigdor-Goldsmid: Having sat through the three months or more during which this Bill and its associated matters have been through the House, and being conscious of the fact that I have contributed as much to these discussions by my silences as by my speeches, I do not intend to spoil my record at this late stage. I am conscious that the House wants to hear my right hon. Friend and come to a decision on this matter, and I do not propose to delay proceedings. But when I compare what happened on Budget day—when, to crowded benches, the Chancellor adumbrated the proposals on which we are now coming to a final decision—with the scene today, I remember the words of T. S. Eliot:
This is the way the world ends Not with a bang but a whimper.
This year we tried a procedure which, to those most experienced in Parliamentary matters, seemed to be likely to prove the most desirable, namely, a divided Committee stage, partly on the Floor—in respect of Clauses on which there was most political mileage, if I may put it that way, and partly upstairs—where the more technical matters were dealt with. It was partly successful. It made for a much better atmosphere at all stages, and was conductive to the proper conduct of business. I wonder whether, in the end, business was properly conducted, however, considering that the Bill has been in front of us for three months and that nevertheless many of the most important Clauses came before the House for the first time only a day or two ago. One is tempted to ask, "What have we been up to?"
I would have thought that an extension of the principle of pre-discussion was useful. This extremely involved disallowance of interest question could have been dealt with much more advantageously if there had been previous dis-

cussion. There could have been no question of hon. Members beating the gun it the subject had beers discussed in Committee or on the Floor of the House on the basis of a Green, Paper, where both sides could have consulted the kind of authorities that are necessary in these matters. We have not yet evolved the perfect procedure. This years' was an improvement on previous years, but we could go a long way further yet.
My right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) suggested that the question of estate duty could have been discussed in advance. I wish that the ingenuity of Ministers, instead of being bent to the defence of indefensible causes and new principles, had been turned to methods of procedure. It that had happened we would have got on better and would also have served the interests of the country much better. We would have had adequate discussion instead of a bang followed by a whimper.

2.28 p.m.

Mr. Iain Macleod: I shall be brief. Apart from a few traditional remarks at the end of the Third Reading debate on the Finance Bill, I shall concentrate on one important matter—the question of disallowance. My hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) commented on our procedure this year. I like to think that I hold most of my views fairly consistently, but I have changed my view over the years as to the proper conduct of Finance Bills—not depending on which side of the House I sit but purely on the question of the best way to serve the House of Commons.
With one or two reservations, I believe that the procedure this year—by which, in effect, the Opposition had four economic Supply Days on the Floor of the House to put forward their views followed by a detailed discussion in Committee, followed by the Report stage—while not the perfect answer was a great improvement on anything that had happened before.
The two reservations are these. First, I agree with my hon. Friend the Member for St. Ives (Mr. Nott) that the Committee was too small. Looking back, that is clearly so, and my hon. Friend mentioned a number of hon. Members—for


example, my hon. Friend the Member for the Cities of London and Westminster (Mr. John Smith)—who would have been very much welcomed to our counsels. A Committee of 30, meaning that with the present representation in the House the Conservative Party has 12, is too small for this operation.
Secondly—this is important, particularly when, as this year, a large number of concessions, or whatever one cares to call them, were made—there must be more time between the end of the Committee stage and the consideration by the whole House of the Bill on Report. I emphasise that by this I am not referring to more time for the Treasury to think out what it is going to do. I mean more time for the House to consider the results of the Treasury thinking, for it is clear that it was at this point that this year's procedure became difficult for hon. Members, and particularly for my hon. Friends who naturally must hoist in complicated new Clauses but who wish to consult interests outside the House who are enormously affected by the proposals of the Treasury.
In an idle hour in the middle of the night recently I counted up the Government Amendments on Report and I reached the total of 134. While some are put together, each one must be put individually by the Chair to the House. Some of them were not particularly important, but some were of vast importance and it is vital that more time should be given for consideration.
We, the Opposition and the Committee, achieved a great deal during the time we considered the Bill. For example, in Clause 25 the Chancellor originally set out to shoot the Beatles, probably not a particularly estimable thing to do since the Beatles make a lot of money for this country, much of it in foreign exchange. Whatever the merits of the operation, it was abundantly clear that the Chancellor, aiming at a fairly narrow target, had scattered his shot so widely that a whole range of ordinary business activities became affected.
The Chief Secretary was wrong about this. Even yesterday, when attempting to justify new Amendments, he said that the situation was now plain to the layman. I rarely criticise the civil servants' pride in authorship, but I found it rather puzzling and not conducive to the

conduct of good business in the House. After all, there are people outside the Government Service who are just as well informed and able in their legal judgments as those inside it. There can be no doubt that Clause 25 was extremely badly drawn and that, as a result of our investigations in Committee, it has been vastly improved.
Before leaving these traditional observations I wish, apart from expressing my gratitude for the civilised conduct of these affairs by the Treasury Ministers, to pay particular tribute to my hon. Friend the Member for Worthing (Mr. Higgins) and my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin) who has borne so much of the burden of opposition. I also pay tribute to my hon. Friends who joined me in Committee upstairs.
I come to the only matter on which I shall comment today: the major innovation of the Chancellor on disallowance. Linking these remarks to my previous comments, it is clear that we were right not to take disallowance as one of the economic Supply days on the Floor of the House but to have first given it the most detailed turning over in Committee. That we certainly did, for we had a morning, an afternoon and an evening followed by an all-night session on the subject. We were much helped by the sympathetic understanding of the Chair, which appreciated our wish to make our main demonstration on this point. The proof of the pudding is in the Bill, with all the new Clauses that were inserted on Repot.
I was criticised a little for welcoming these new Clauses—on the ground that, when in opposition I suppose, one should never welcome anything that appears from a Government. I do not take that view. I believe that there is more joy in the Parliamentary heaven over one Socialist sinner that repenteth than ninety and nine just Tories who need no repentance. I therefore welcome what was done.
I tried at all stages of the Bill to consider the difficult problem of disallowance from the point of view of equity, as did the Government, up to a point; but the point came when we parted company. We are naturally pleased that, as a result of our pressure in Committee, so many


Amendments have been made. However, nobody who listened to our debates—for example, on estate management and on borrowings against insurance policies—could conclude that the position can be left as it is. Indeed, the position now is more confused and less logical than it was before the new Clauses were tabled.
The Chief Secretary told us that the Government had looked at the experience and legislation of other countries, notably the United States, Canada and Australia. So have we. There may be, as some countries have concluded, an argument for looking at cases where money is borrowed for the purposes of an artificial transaction, and I think it right that we should reserve our position on this.
However, the principle of these Clauses is not acceptable to us. We believe, as all other previous Chancellors have held, that the charge to tax should be made on net income after allowing expenses necessary to obtain it. We believe that relief should be available, as in the past, for interest on borrowings for all normal personal, family, professional and business purposes; and, accordingly, when we form a Government we shall repeal these Clauses.
When I made some preliminary remarks on this matter the Chief Secretary said that this was a point of view which he found entirely respectable. Indeed, he could say no other from the experience of some of the countries I have quoted. Thus, while I may not have his agreement, I have his understanding. The Financial Secretary has been mute on this matter, not of malice but perhaps of embarrassment, and I have a feeling that he may have raised a silent cheer as I spoke a moment ago.
My hon. Friend the Member for Louth (Sir C. Osborne) made an excellent speech. It is entirely right to question the effects of the Bill on the ordinary citizen. As a senior Parliamentarian, my hon. Friend knows that a vote against Third Reading is a vote against everything in the Bill, including not only the things one dislikes but some of the things one may like and some of the machinery of Government. It is well understood, however, that when, as last year, we had a formidable weight of taxation

added—it was over £900 million—then, even with that reservation, it was not possible for us to give a silent hearing to the Third Reading, and we voted against it. This year, the position is different and I think that, in the statement which I have just made, I have been able to remove one considerable anxiety of my hon. Friends. I must make it clear that the fact that we do not vote against the Bill does not mean that we view it with approval. I agree very much with my hon. Friend the Member for Guildford (Mr. David Howell), that we must move towards a vastly simpler method of legislation on Finance Bills.
Mr. Speaker, you have a copy of the Bill and in a few moments you will hold it up and suggest that it be now read a Third time. There are 200 pages in it. Some of it is consolidation—Schedule 20, for instance—and that is welcome. Some of it is useful. Some of it is an addition—an ill-digested and, for all our work over the last three months, still ill-considered addition—to all the mass of legislation which has gone before. Could I invite your attention to the very last page of this Bill, which contains the words:
"Ordered, by The House of Commons, to be Printed, 26th July, 1969."?
We have not yet reached the 26th of July. The Government cannot even get that right.
I am not sure whether, on a point of order, I cannot ask for the Bill to be thrown out at this stage. The Chancellor is checking. He will find that I am right. The date of 26th July, incidentally, is a Saturday, when very few Bills are printed—or it will be, when we reach it. They mean, I suppose, 26th June, but it is a pleasing thing to see that, as an epitaph among the last words on the Bill, it comes from a Government who do not know what day of the week it is, or which month it is. I suppose that we should be grateful that they have got the year right.

Mr. Speaker: I do not know whether the hon. Gentleman is raising a point of order, and, if so, whether it was "indefeasible" or "indefensible".

2.42 p.m.

The Financial Secretary to the Treasury (Mr. Harold Lever): I must leave the Opposition to make what mileage they can out of misprints in the Finance


Bill and other documents produced by the Stationery Office. This is a perfectly legitimate method of argument.
It would be churlish if I were not, in winding up the Third Reading debate, to acknowledge, on the Government's behalf, the great courtesy, the great intellectual effort and the great contribution made by the Opposition throughout our debates in helping to improve the Bill. It is a little unfortunate that, when we take note of what they say and respond to what is said, not merely from that side but from critics on our own side, in order to perfect the original proposals put before the House, this is taken as a ground for criticism of the Government. No one is asking for gratitude for making these concessions. It is simply what one would expect from an intelligent Government that they should be responsive to intelligent criticisms, and nothing should be said which discourages this virtue, which is not to be taken for granted in Governments.
I am glad that we have made progress in our discussions, greatly helped by Front Bench and back bench Opposition speakers, in Committee and on the Floor of the House. They are entitled unreservedly to these tributes. They were a first-class Opposition on the Bill and I have not the least difficulty in envisaging many years of success for the Opposition in a similar capacity on future Finance Bills, and much to the public advantage. One could anticipate that with reasonable confidence.
On our methods of procedure, now that the Chancellor has returned, I have to repress my own heretical tendencies. I feel that we must look again at some of the procedures which we have adopted on Finance Bills always seeking to make an improvement. I agree with the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) that we feel the need increasingly, as legislation on Finance Bills gets more and more complex, to seek a means for protracted study, where possible, and where nothing secret is involved, in advance of the more formal decisions, in discussions of a more restricted character, upstairs and downstairs. How we achieve that is a matter on which we must take counsel together. I also see the difficulty created by the short gap between the end of the Committee stage and the beginning of the Report

stage. We operate on a very short time scale, which has circumscribed the time available.
I do not propose to attempt to turn over again the arguments on the Finance Bill, and I do not think that any hon Member will think me discourteous, because no one expects, on Third Reading, that an argument of special novelty is likely to be uncovered. All the points raised have been thoroughly discussed it previous stages and many hon. Members made their points again today more by way of demonstration than in a desire for a detailed response at this late stage.
The main purpose of the Bill was the economic purpose outlined by the Chancellor in his Budget statement and in his speech today. I think that it has been successful in its main purpose. The alarmists who thought that it was too much, the pessimists who thought it was too little, seem, as events unfold, to he increasingly discounted. More and more is it becoming obvious that the Chancellor's broad strategy in the Bill was right.
The hon. Member for Walsall, South complained that the Budget begins with a bang and ends with a whimper, but this is partly inevitable because of our style of handling these things, in which the Chancellor is cast, in making his Budget speech, by the Press and organs of publicity, rather in the rôle of Moses descending from Sinai to find the Israelites making merry before a golden calf and obliged to take appropriate action. My right hon. Friend, cast somewhat surprisingly in this patriarchal rôle, fulfils it dutifully in his opening statement and thereafter we can, through the more routine processes, give calm and detailed consideration to all the Finance Bill proposals.
We have done so, and we have come to the end of our labours. Whatever differences of opinion we may have had on different items, both sides have contributed to the anxious and detailed discussion and we can now put the Bill to bed, so to speak, with an agreed Third Reading.

Question put and agreed to.

Bill accordingly read the Third time and passed.

Orders of the Day — PUBLIC WORKS (LOCAL AUTHORITY LOANS)

2.48 p.m.

The Financial Secretary to the Treasury (Mr. Harold Lever): I beg to move,
That the Local Loans (Increase of Limit) Order, 1969, a draft of which was laid before this House on 20th June, be approved.
This Order increases the limit on the amount of money which the Public Works Loan Board can lend, which used to be done by means of a Public Works Loan Bill and is now done by means of this Order. I do not know whether there is any exhaustive and detailed interest in the technical processes of the Order, but if any hon. Member wants to raise any point I shall be happy to deal with it.

2.49 p.m.

Mr. John Nott: The Order increases the borrowing powers of local authorities and it comes immediately after the Third Reading of a Finance Bill which contains a Clause to enable local authorities to borrow abroad. These two matters are, in their way, directly related. I know that the Financial Secretary has been an enthusiastic sponsor of the idea that local authorities should be allowed, within their increased borrowing limits, to borrow abroad. When the Treasury, under the allowance given, enable a local authority for the first time to borrow abroad, may we have an assurance that the local authority concerned will bear a name which will set high abroad the credit of local authorities generally—for example, the Greater London Council, or the Manchester or Birmingham Corporation? When local authorities go abroad to borrow for the first time, we must ensure that a name is offered which is creditworthy in the eye of the lender.
I make this appeal because recently in the Press there have been indications that some county councils might be the first to lead local authorities in borrowing abroad. They are highly reputable and undoubted borrowers, but foreign lenders do not understand our system. This, I believe, would set the whole notion which the Financial Secretary adopted off in the wrong way. I appeal to him to ensure that the first borrower, within the limits set out in the Order, will be a name which will establish the credit of local authorities borrowing

abroad. Let it be a good name for technical borrowing purposes. In my opinion it can be only one of three.

2.51 p.m.

Mr. Terence Higgins: When we debated the National Loans Bill, under which this Order is tabled, we tried to move an Amendment to ensure that we should have an opportunity of debate whenever the Government increased the limit by £500 million rather than every time they increased it by £1,000 million. On that occasion, the decision was taken only by the Chairman's casting vote. At the end of a week in which we have had no fewer than four days on the Finance Bill, it is not surprising that anxiety for such a debate has been somewhat diminished and that even the Financial Secretary's enthusiasm for reading a large and detailed brief has somewhat diminished.
There is one point on which perhaps he would be good enough to give me information, if he has it available. In Committee on the National Loans Bill he pointed out that the limit imposed was on the gross amount, taking no account of the amount of repayment which had taken place from local authorities to those who had given them the loan in the first place through the Loan Commissioners. If he has that figure, perhaps he would give it now or, if not, perhaps he would let us have it on a future occasion. Effectively that increases the limit in the same way as that in which an overdraft might be increased, without making any significant difference to the amount actually advanced to the local authority.
We do not feel it necessary to divide against this Order, but perhaps the Financial Secretary will tell us at which stage we are likely to be up against the limit. In Committee the Financial Secretary suggested that probably he would have to come to the House in respect of the limit every 18 months whereas my hon. Friends suggested that it might be necessary every two years. In fact, it has taken almost exactly 18 months, but, of course, the Financial Secretary is in a position to determine whether his forecast was right or whether our forecast was right. We ought to know how near we are to the limit. Perhaps he would give some idea at which stage we shall pass the gross figure of


£1,000 million set under the present legislation.

2.53 p.m.

Mr. Harold Lever: The hon. Member for St. Ives (Mr. Nott) appreciates that he raised a rather technical point and that it is not appropriate for me to answer it across the Floor. He wants the biggest and most powerful name, from the technical point of view, to be presented in the initial borrowing. Beyond registering that point, I cannot usefully discuss with him the mechanics of the operation abroad for raising the money. I am prepared to discuss it with him privately at any time.
I will inform the hon. Member for Worthing (Mr. Higgins) that we have had repayments of £170 million from local authorities and that we are within £250 million of the limit. In the financial year 1968–69 the Public Works Loan Board lent £597 million. So far in this financial year they have lent about £142 million. That means that there is a balance of about £260 million available for further lending by the Board. It ought to be made clear that what is occuring is not an increase in local authorities' borrowing powers. This is an authorisation to the Public Works Loan Board to lend more to local authorities and it has nothing to do with the total borrowing powers of local authorities.
By tradition, I have the pleasant task of a concluding comment on a proposal of this sort by asking hon. Members to join me in expressing thanks to the Public Works Loan Commissioners for the services which they have continued to render with such skill and, of course, as we all know, on an entirely voluntary basis.

Question put and agreed to.

Resolved,
That the Local Loans (Increase of Limit) Order, 1969, a draft of which was laid before this House on 20th June, be approved.

Orders of the Day — MEDICAL BILL [Lords]

Not amended (in the Standing Committee), considered; read the Third time and passed.

Orders of the Day — NURSES BILL [Lords]

As amended (in the Standing Committee), considered.

Mr. Speaker: I have selected all the Amendments on the Order Paper and consequently have not published a list of selections. They are all Government Amendments and I suggest that we take them all together.

Clause 2

CONSTITUTION OF GENERAL NURSING COUNCIL FOR ENGLAND AND WALES

2.56 p.m.

The Under-Secretary of State for the Department of Health and Social Security (Mr. Julian Snow): I beg to move, Amendment No. 1, in page 3, line 25, leave out from 'registered' to 'prescribed' in line 26 and insert:
'general nurses or nurses registered in any part of the register'.
I understand that we are taking all the Government Amendments together. They are all merely drafting Amendments consequential on Amendments accepted in Committee. The Amendment to Clause 2, which relates to the General Nursing Council for England and Wales, changes the remaining references to nurses registered in the general part of the register and enrolled in the general part of the roll to read:
registered general nurses and enrolled general nurses.
The Amendments to Clause 3, which relate to the General Nursing Council for Scotland, are made to bring the Scottish provisions into line with the amended Clause 2.
The Amendments to Schedule 1 introduce consequential definitions of registered general nurse and enrolled general nurse.

Mr. Maurice Macmillan: I do not wish to detain the House but I wish to thank the Under-Secretary of State for making these Amendments, which were consequential upon representations made in Committee. They will help to meet the doubts and difficulties which were expressed by some sections of the nursing profession about the previous wording of the Bill.

Amendment agreed to.

Further Amendment made: No. 2, in line 40, leave out from 'enrolled' to 'prescribed' in line 41 and insert:
'general nurses or nurses enrolled in any part of the roll'.—[Mr. Snow.]

Clause 3

CONSTITUTION OF GENERAL NURSING COUNCIL FOR SCOTLAND

Amendments made: No. 3 in page 5, line 42 leave out from 'be' to 'shall' in line 43 and insert 'registered general nurses'.

No. 4, in line 43 leave out 'nurses so registered' and insert:
'registered general nurses or nurses registered in any part of the register prescribed under section 2(2)(f) of this Act;'.—[Mr. Snow.]

Schedule 1

MINOR AND CONSEQUENTIAL AMENDMENTS

Amendments made: No. 5, in page 10, line 19 at end insert:
5. In section 34 of that Act the following definition shall be inserted at the appropriate place:—
'registered general nurse' means a nurse whose name is included in the general part of the register.

No. 6, in page 11, line 7, at end insert:
'enrolled general nurse' means a nurse whose name is included in the general part of the roll.

No. 7, in page 11, line 16, at end insert:
'registered general nurse' means a nurse whose name is included in the general part of the register.—[Mr. Snow.]

Bill read the Third time and passed, with Amendments.

JUDICIAL OFFICES (SALARIES)

2.59 p.m.

The Attorney-General (Sir Elwyn Jones): I beg to move,
That the Judicial Offices (Salaries) Order, 1969, a draft of which was laid before this House on 11th July, be approved.
The object of the Order is to increase the salaries of the recorders of Liverpool and Manchester, the county court judges and the Metropolitan magistrates following the salary increases for the higher civil servants recommended by the Standing Advisory Committee on the Pay of Higher Civil Servants—the Plowden Committee. The Order is made by the Lord Chancellor, with the concurrence of the Treasury, under powers contained in the Judicial Offices (Salaries and Pensions) Act, 1957, and the County Courts Act, 1959.
As the House will be aware, the Plowden Committee recommended increases for Civil Service grades of Under-Secretary and above in three stages. The Government have decided to implement the first stage increases from 1st July, 1969, and these are in the range of 12·7 per cent. to 14·3 per cent. over the 1st September, 1969 rates:
It has been accepted since the war that the salary levels of the lower judiciary should be kept in step with the salaries of the higher civil servants. It is, therefore, the Government's intention, in seeking the approval of Parliament to this draft Order, to increase these judicial salaries in line with the Plowden recommendations. The average increase is one of 13·5 per cent. over the last increase, which was made by a similar Order in May, 1966. The last increase was, however, related to Civil Service salary increases which were made in September, 1965, nearly four years ago. The annual rate of increase for the judicial officers is, therefore, 3·4 per cent., which is within the Prices and Incomes ceiling.
The result of the increases will be to raise the salaries of the recorders of Liverpool and Manchester from £6,550 to £7,400. The salaries of county court judges will be raised from £5,775 to £6,550, and the Chief Metropolitan Magistrate will get the same increase. The salaries of the other Metropolitan magistrates will be increased from £5,300 to


£6,050. There are now 100 county court judges and 35 Metropolitan magistrates, in addition to the Chief Magistrate. The gross cost of the increases in the salaries proposed by the Order will be about £106,000 a year.
It is the view of the Government that the proposed increases are an appropriate consequence of the increases that are being made for the higher Civil Service, and I invite the House to approve the Order.

3.2 p.m.

Sir Peter Rawlinson: I certainly do not intend to oppose the Order or to controvert anything which the Attorney-General has said, but I am glad that the Order has not gone through wholly on the nod because it is of importance that the House should look at proposals for an increase in the salaries of the lower judiciary As the right hon. and learned Gentleman has said, the lower judiciary bear a relationship to the higher civil servants, and in recent years it has always been held, with the agreement of all, that when there are these revisions of the salaries of the higher civil servants the members of the lower judiciary should, as it were, go along with them.
We are here dealing with the salaries of 100 county court judges and 35 Metropolitan magistrates who are, apart from the great body of non-professional magistrates, the professional judges to whom so to speak, most people come into contact, either in their minor civil claims or in minor criminal offences. The standard of justice depends on the standard of these men, and it is only right that, as we demand, and get, a high standard from the lower judiciary, they should be paid appropriate and proper salaries. This proposal sees to it that their salaries are properly increased, so I join with the Attorney-General in commending the Order to the House.

Question put and agreed to.

Resolved,
That the Judicial Offices (Salaries) Order, 1969, a draft of which was laid before this House on 11th July, be approved.

ANTI-DUMPING DUTY (ALARM CLOCKS)

3.5 p.m.

The Minister of State, Board of Trade (Mr. William Rodgers): I beg to move,
That the Anti-Dumping Duty (No. 1) Order, 1969 (S.I., 1969, No. 895), dated 2nd July, 1969, a copy of which was laid before this House on 3rd July, be approved.
This Order has been made under the Customs Duties (Dumping and Subsidies) Act, 1969. It imposes an anti-dumping duty of 2s. 0d. each on mechanical alarm clocks of a value less than 12s. 0d. each originating in the People's Republic of China. In accordance with normal practice there is provision for relief under Section 2 of the Act in respect of any imports which are shown to the satisfaction of the Board of Trade not to be dumped or not to be dumped to the full extent of the duty.
An application was received from the British industry in July, 1968, alleging dumping by China. Czechoslovakia, Hungary, Poland and the U.S.S.R. with consequent material injury. Following discussions with the British industry and the provision by them of certain essential additional information, the Board of Trade were satisfied that a prima facie case had been made for an investigation, and a public announcement that the Board of Trade were considering the application was published on 22nd November, 1968 in which representations from interested parties were invited.
The Board of Trade established fair market prices for alarm clocks from each of the countries named in the application. To do this, use was made for the first time of the powers granted to the Board of Trade in the Customs Duties (Dumping and Subsidies) Amendment Act, 1968, which has since been consolidated in the Customs Duties (Dumping and Subsidies) Act, 1969. These powers enable the Board of Trade to determine fair market prices, in the case of state-trading countries, by reference to the price of identical or comparable goods exported to the United Kingdom from another country.
In this case the fair market prices were established by reference to the price of similar alarm clocks from the Federal Republic of Germany. The fair market prices were found to be higher than the


c.i.f. prices of imports from each of the countries named in 1968 by amounts, varying according to country, between 2s. and 3s. 9d. per clock.
The House will not expect me to go into details of our findings in relation to dumping and consequent material injury which were based on financial and other information given to the Board of Trade in strict confidence. But, I can assure the House that the case was investigated very thoroughly and our findings were based on a careful study of all the evidence.
Following discussions with the countries concerned, the trading organisations of the U.S.S.R., Poland, Hungary and Czechoslovakia decided to raise their prices for all shipments entering the United Kingdom from 4th July to the fair market levels determined by the Board of Trade. These assurances have been accepted; we shall see that they are implemented, but otherwise no further action is to be taken.
Discussions were also held with representatives of the Chinese Government. No corresponding assurances were received, and an Order has therefore been made. If satisfactory assurances are received at some future time, we will, of course, consider revoking the Order.
The anti-dumping duty in the case of the People's Republic of China took effect from 4th July and I invite the House to approve the Order.

3.7 p.m.

Mr. Peter Blaker: On behalf of hon. Members on this side of the House, I welcome this Order. This is a long-standing application. The Minister referred to the application put in on behalf of the industry in July, 1968, but the matter goes back further than that. I take it that the reason that the application he referred to was made in 1968 was that that was the date when the new Act came into effect, but the application had been made on behalf of the industry a number of years before.
I should like to put to the Minister a number of questions because, as he said, this is the first Order made under these powers. I therefore think it is of general interest to industry as a whole and not only to the makers of alarm clocks.

Mr. Speaker: Order. This is a debate which has to do with anti-dumping measures against Chinese alarm clocks.

Mr. Blaker: I am very sensitive to that point, Mr. Speaker, and I hope I may persuade you that what I am about to say is in order and I think that all my questions will be.
A long time has elapsed since the application was made. It was put in in July, 1968, but already at that time the Ministry had considered two previous applications made by the industry on what must have been very similar facts. Nevertheless, it has taken a year before the Government were able to lay this Order. I recognise that in most cases of a definitive anti-dumping Order six months or thereabouts elapses, but in this case there was a longer period. This was in a situation where I should have expected the time taken to have been shorter because of all the spade-work the Ministry must have put in in relation to applications to the same effect which had already been submitted. Perhaps, therefore, the Minister can explain why such a long time has elapsed.
How does the new procedure which the hon. Gentleman has explained and which is contained in the 1968 Act, now consolidated in the 1969 Act, differ from the former procedure concerning imports from a State trading country? The Minister will, no doubt, be aware of correspondence with my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin) which was referred to in Committee on the 1968 Bill, when the Minister of State, the right hon. Member for Sheffield, Hillsborough (Mr. Darling), explained the practice then adopted by the Department in dealing with applications from State trading countries before the new procedure provided in the Act was available. He said that the Government normally preferred to operate within the framework of bilateral trading agreements with State trading countries and that the Government normally found it easier and quicker to proceed in that way.
Explaining the way in which the degree of dumping was established, the right hon. Gentleman said:
In considering such allegations, we base our decision on a comparison of the landed price…with the ex-works prices of comparable British products and the landed prices


of comparable goods imported from other market-economy sources."—[OFFICIAL REPORT, 29th April, 1968; Vol. 763, c. 882.]
That, I understand, is exactly the same procedure as has been used in this case and as laid down in the 1969 Act.
In other words, to establish whether there is dumping and the degree of dumping, a comparison is made with the prices of comparable goods imported from other market economy sources. The Minister has said that the goods chosen for comparison this time were from the Federal Republic of Germany. I should like to know from the Minister how the new procedure, which has been used in this case, compares with the former method.
My third question relates specifically to China. I understand that these alarm clocks have been coming in from China at remarkably low prices, something like 5s. 6d. or 6s. a clock, to which 2s. is to be added as a result of the Order, in addition to the tariff of 2s. 6d. per clock. This is obviously a very low figure, with which it is difficult for the home industry to compete. Can the Minister say what has been the effect in general terms of these dumped clocks on home manufacturers? He has, of course, had to establish that material injury to them has been caused, and I wonder whether he can say to what extent their sales have suffered.
I observe that there is already a quota for mechanical alarm clocks from the Republic of China amounting to about £20,000 worth of such clocks a year. The yearly import figures for clocks of this class for the last four years have been approximately £20,000 or a little below. In 1965, the value was £21,000 and in 1968, £19,500. That is relatively a small quantity of imports. In spite of this fairly small quota, however, it is still possible for material injury to be caused to British manufacturers by dumping. This is an indication of the sensitivity of the market.
My next question is very brief: why was West Germany chosen for purposes of comparison? My last question relates to the policing of these arrangements. Under Article 3 of the Order, as the Minister has rightly pointed out, there is provision for remission of duty in certain cases. This will require policing in relation to China, and there is also the question of policing in relation to Eastern European countries which have given

assurances. It will be necessary, presumably, to see that their assurances about the future prices which will be charged for their clocks are maintained. It would be helpful to the industry if the Minister would say how this policing is to be done. Subject to those questions. I welcome the Order.

3.16 p.m.

Mr. William Rodgers: I will try to help the hon. Gentleman, and, in so far as I fail to answer all his questions, I shall certainly do so by correspondence. I think they are important and relevant to this application.
I am sorry that it has taken some time to bring forward this Order but, as the hon. Gentleman said, this is the first case under the Act and, whereas there was an application in September, 1963 for an anti-dumping Order, at that time we did not feel it was justified and so, in a sense, it was necessary in different circumstances to begin our inquiries all over again.
As the House knows, five countries were involved, and in addition it was necessary to carry out further elaborate technical assessments in order to establish precisely what the position has been. I am sorry that it has taken some time. I am sure that it is our wish to bring forward these Orders as fast as possible consistent also with a proper investigation of the facts of the case made.
The hon. Gentleman asked for a comparison between the present procedures and past procedures, and referred to the correspondence between my right hon. Friend the Member for Sheffield, Hillsborough (Mr. Darling) and the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin). Under the old procedure it was a question of enabling dumping to be established by reference to domestic prices in the country of export or, alternatively, the costs of production, or prices to third markets. None of these was suitable for eastern area countries. That is why the new method of comparison of imports into the United Kingdom of comparable goods imported from other, market-economy, sources is now used. There is a significant difference here.
The hon. Gentleman also asked why West Germany was chosen. West Germany is the traditional supplier of


comparable alarm clocks. There are very few from other sources except the sources examined on this occasion. I note what the hon. Gentleman says about the quota not being enough, but I think the case has been fairly made here.
The hon. Gentleman asked about the degree of material injury. Confidential information has been given to the Board in the course of its investigation. I can say that the injury was very serious, but I cannot give the actual figures on this occasion and I do not believe that it would be in the interests of the industry, with which the hon. Gentleman is concerned, that I should do so. The goods are subject to licence, and steps are being taken to ensure that assurances are carried out by the inspection of records by Board of Trade officials and in other ways. We shall do all that we can to ensure that there is no breach.
I hope that, given those assurances, the House will be prepared to accept the Order.

Question put and agreed to.

Resolved
That the Anti-Dumping Duty (No. 1) Order, 1969 (S.I., 1969, No. 895), dated 2nd July, 1969, a copy of which was laid before this House on 3rd July, be approved.

CARRIAGE BY AIR ACTS (AMENDMENT ORDER)

3.20 p.m.

The Minister of State, Board of Trade (Mr. William Rodgers): I beg to move,
That the Carriage by Air Acts (Application of Provisions) (Amendment) Order, 1969, a draft of which was laid before this House on 3rd July, be approved.
This Order amends the Carriage by Air Acts (Application of Provisions) Order 1967, which, among other things, extended to air mail the principles of the Warsaw Convention as amended at The Hague and of the Quadalajara Convention, which impose liability in respect of carriage of goods and limit a carirer's liability in the event of loss or damage occurring during air transport.
At the time the 1967 Order was made, air mail services were run by the Postmaster-General, who enjoyed certain exemptions from liability in relation to the postal services. In order to preserve these exemptions, the 1967 Order con-

tained provisions ensuring that it imposed no liability on the Postmaster-General. The House is aware that, if the Post Office Bill is enacted, we expect the new Post Office to take over the running of the postal services from 1st October next. This House and another place have recently debated the Post Office Bill at length and have decided that the new Post Office should have the same exemptions from liability as the Postmaster-General. It is, therefore, necessary to make a consequential amendment to the 1967 Order so that it will cover the new situation. The Order at present before us, therefore, amends the 1967 Order so that it will cover the new Post Office when it begins operating.
I should, perhaps, add that Clause 29(3) of the Post Office Bill, if enacted, may well necessitate further amendment of the Carriage by Air Acts (Application of Provisions) Order 1967. That. however, is a more complex issue which will involve prior consultation with those concerned and does not in any way affect the immediate necessity for the present Amendment Order which, I repeat, is designed solely to ensure that any authority established to provide postal services shall enjoy the same immunity as the Postmaster-General at present enjoys in respect of carriage of mails by air.

Question put and agreed to.

OBSCENE PUBLICATIONS

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Fitch.]

3.22 p.m.

Mr. E. S. Bishop: I am pleased to have opportunity today to draw attention to the operation of the Obscene Publications Acts. I should refer at the outset to the circumstances of an Adjournment debate on a Friday, when numbers in the Chamber are inevitably limited, and the consideration that if one is to exercise freedom the House might possibly have to consider the matters raised without the public being present, with the consequence, I understand, that nothing of what I have to say would appear in HANSARD. These considerations make me very sensitive to the situation and force me to accept the


presence of the public, with the restrictions which that may place on hon. Members. None the less, I shall have regard to the people who are present today, and I hope that those who are not here but who read our proceedings will bear in mind that there have been some understandable inhibitions in the presentation of the case.
The matter which I am raising follows upon correspondence which I have had for some time with the Solicitor-General and the Home Office, to whom I have made representations concerning two magazines. Lest some may wonder whether I am rather sensitive, I say now that my wife and I have been magistrates for many years and we have a family of teenage and 20-year-old daughters. I can fairly say, therefore, that we are not unduly shocked by what we hear or see, and I think that I am sufficiently "with-it" to know that a rolling stone is not just a loose cobble in the ancient market place of Newark.
I have sent copies of publications to the Ministers to whom I have referred. I regard these publications as not only shocking and disgusting but liable to corrupt and deprave, as specified in the Acts. The Ministers have accepted that, although they may shock and disgust, they cannot be regarded as tending to corrupt or deprave. I understand that this advice has been taken with the guidance of the Director of Public Prosecutions.
I can well imagine the reluctance which there is to take action in the courts in case the action fails and the publishers of such literature can then feel much safer and freer in their publication. If legislation is such that it is not operated, then the purpose of the Act fails. There is another aspect. If there is legislation and no action is taken, the public, including young people in particular, will feel that there is an unofficial stamp of approval and many will say, "It must be all right to buy such stuff, because otherwise the authorities would stop it being sold." This is a very important point. There is the implied approval to stuff which is continuing to be sold.
I shall refer in this brief debate only to magazines and not to a wider range of publications, as one could easily do, where there may be some literary merit of sex and its associations being an aspect

of a continuing story, although I suspect that the spicy parts of some of our books are concocted first and the whole thing is then wrapped up into a story to ensure good financial returns. The publications to which I refer were not bought at seedy Soho bookshops, where some customers may already be depraved, but from the ordinary kind of High Street shop of good repute, where smokers buy their tobacco, children may buy sweets and workers buy their newspapers. There one can see these magazines which, for obvious reasons, I shall not name. They are piled up next to copies of reputable local and national newspapers.
Of course, it is important to say this because, in dealing with the Obscene Publications Acts, it is essential to have regard to the people buying them, the circumstances in which they were bought, the reasons for which they were bought and so on, so as to ensure that there is a right definition of the need to recognise the tendency to deprave and corrupt.
In the particular publications which I have sent to the Minister, there is on one page a series of drawings featuring a man, a rather slobbering, slithering, drooling-at-the-mouth creature, expressing signs of wanting sexual satisfaction as he sees a girl pass by. The series ends with him chasing her with obvious intentions into an alleyway, and he is shown brought abruptly to a halt as he sees her bending down, completely exposed at the back, and even he falls to the ground in shock. One can well imagine what the effect is on decent readers.
On another page in the magazine there is a fully erected black male sex organ, about nine inches in length, and along its length are four sketches of women in various states of undress. I should have thought that these two illustrations were such that action should have been taken. No one can say that these particular illustrations are in any way a part of any literary or artistic effort. They are, indeed, quite out of place. So far as one can see, their only intention is to sell the magazine in future.
The dilemma facing Parliament and, of course, the police, is the definition of obscenity and corruption as specified in the Obscene Publications Acts of 1959 and 1964, for on that rests not only the degree of control which may be exercised, but


also other Acts which are supplementary to them.
The test of obscenity in the 1959 Act is given in Clause 1, which says that an article shall be deemed to be obscene if
…its effect…is, if taken as a whole, such as to tend to deprave and corrupt persons who are likely, having regard to all the relevant circumstances, to read, see or hear the matter contained or embodied in it.
This matter has caused a great deal of concern, and the 1964 Act followed a Select Committee Report on the workings of the 1959 Act. The problem of definition was apparent then as it is today, for the Select Committee considered it carefully and its recommendations were embodied in the 1964 legislation.
Unless we can decide at what stage an article, not merely shocks or disgusts, but has a tendency to corrupt or deprave other measures dependent on definition become useless.
Section 1 of the Children and Young Persons (Harmful Publications) Act, 1955, says that the
Act applies to any book, magazine, or other like work which is of a kind likely to fall into the hands of children or young persons and consists wholly or mainly of stories told in pictures (with or without the addition of written matter), being stories portraying—

(a) the commission of crimes; or
(b) acts of violence or cruelty; or
(c) incidents of a repulsive or horrible nature;
in such a way that the work as a whole would tend to corrupt a child or young person into whose hands it might fall.
In an answer to a Parliamentary Question a few days ago which I addressed to the Secretary of State for the Home Department, I was told that there had not been any cases brought under this Act for five years, which was the point of my Question, and I understand that it is also true that no prosecutions have been taken under this Act since its enactment in 1955.
I suppose that the House should be delighted that this Measure, introduced mainly, I understand, to deal with the flood of horror comics from abroad, has not been operated, because it is thought that no publications considered likely to corrupt children and young persons have fallen into their hands. I should like to think that; because this is the implication from the fact that no action has been taken since 1955.
Here I suggest that there may be problems of definition as to whether the material under consideration is liable to corrupt or deprave those who read it. This Act becomes rather pointless unless we are clear on that point. What a blissful situation suggesting that children read only of Mr. Plod the Policeman and that Enid Blyton is their patron saint. I fear that this is far from being true and that in fact if only some of the adult publications came within their range the Act would have been violated, in which case I wonder why proceedings were not brought. Is it not accepted that what may deprave adults may have an even greater tendency often to deprave young people?
I want now to refer briefly to some correspondence which the hon. Member for Barkston Ash (Mr. Alison) has kindly handed to me and which he has received from the Chief Education Officer of the County Council of the West Riding of Yorkshire. In the correspondence the Chief Education Officer expresses very grave concern about the problems which teachers have to face in schools nowadays. I understand that there has recently appeared in some of the sixth forms in schools in the area a publication whose name I will not give. It is obviously produced by young people and for young people, and it is concerned with protest, and so on. It also advertises a number of publications commercially produced but also aimed at young children. I shall be referring to the publications in a moment. They include the ones on which I have had correspondence with the Minister. Two of them are published in this country. I understand that the Education Officer obtained copies of these papers from a shop in Leeds named as selling them. He has taken extracts from them. If one looks at the extracts one is made aware of the grave problems that face parents and teachers.
A writer states:
One must assume that the Director of Public Prosecutions decided that it was not appropriate to take action against these publications because, although they may shock and disgust, he might find it difficult to prove that they deprave or corrupt.
Later the letter says:
If this is so, there must be many education officers whose imagination would be stretched to the limit wondering what must be committed in order that something may be judged to have a tendency to deprave.


The writer goes on to give a photostate copy of some of the advertisements in a publication, and they are identical to the ones with which Ministers and I have been concerned.
There are a number of these advertisements and it is difficult, in the circumstances in which I am placed this afternoon, not to spread the kind of gospel with which they are concerned. I will only say, summarising them, that they invite young men and women to partake in situations where homosexuality, lesbianism and even bestiality is involved. They even mention some of the paraphernalia with which sexual malpractices may be performed.
The whole phraseology of these advertisements is designed to arouse the interest of children in these practices. I suggest that the impression is given that these things should appeal to young people who, these days, are really "with it" and that they give the impression that anyone who does not conform to this standard of practice, outlook and activity is a prig, when the reverse is really the case.
There are a number of advertisements for young men to share flats, as long as they have a certain outlook, and the same for women—students and so on—for initiation into all sorts of sexual experiences, straightforward and otherwise. There are also photographs of women called "Pussycats", "Dandy Jims" and others. Hon. Members will be familiar with these names, and I need not give others.
There is an extract about the incidence of lesbianism among "Groupies", giving the impression that they think nothing of it and saying that they prefer homosexual and bisexual boys and emphasing that if one can be bisexual that is better still. There is reference to certain practices, including bestiality. The whole tone is disgusting, and I can imagine the problems that face teachers and others dealing with children who may be subject to the corrupting and evil influences to which the publication refers.
I urge the Minister to recognise that in these publications we are concerned not merely with four-letter words but with some of the advertisements urging people to partake in practices. Although I had every intention of speaking frankly

today, I fear, since the Public Gallery is occupied, that my remarks must be very much at a Sunday school level compared with the correspondence that I have received, particularly correspondence received this morning. This causes me and many hon. Members who have seen it very grave concern. We fear that this advertising may encourage people to think that these are normal practices and that they should take part in them. Do these matters come within the confines of the Acts?
If I can pursue the logic of that, I am saying that if we cannot define clearly what is liable to corrupt and deprave, it brings other Acts into disuse, to some extent—or at least causes difficulties in operating it. I refer to the Post Office Act of 1953 which provides, in Section 11, that a person shall not enclose
any indecent or obscene print, painting, photograph, lithograph…book, card or written communication
in material to be sent by post. If there is no clear definition of obscenity little can be done by the Post Office to prevent our postal services being used to transmit indecent mail.
That may account for some of the mail-order literature of a doubtful character. Many hon. Members have recently received order forms sent out by the Julian Press, in which the recipient is offered a 60s. book called "Variations an a Sexual Theme" in which 40 posed photographs of unclothed human models illustrate variations of positions possible in sexual intercourse
including basic coital positions …portrayed in intimate detail for full sexual ecstasy
Even movements and caresses are included in the "bargain deal". I know that many hon. Members have received this literature which comes from the Julian Press, and I also know how widespread is the concern about this literature.
It is noted on page 1 that
This is a book that dare not be published ten, five, or even one year ago.
Hon. Members would not protest, possibly, if it were apparent that the book came from reputable medical publishers and was part of a wide range of medical books, but the suggestion is that this book is offered purely—if that is the word—as a commercial proposition. I know of the deep concern of many of my hon. Friends about this firm.
A constituent sent me a leaflet offering him
'unspoilt and uncensored art productions
and films at prices ranging from 35s. to £13 for all-male photographs and films of "boy and girls". The letter was sent to a certain address, and the name on the envelope was rather different from that of the occupier. Clearly, this literature is sometimes sent out quite discriminately.
In a Parliamentary Question to the Chancellor of the Exchequer this week, I asked if he would
take steps to restrict further the amount of foreign currency spent abroad on the import of pornographic literature; and what action he is taking to prevent such spending, especially from Scandinavian countries".
The reply was that
The importation of obscene matter is prohibited, and the prohibition is enforced by H.M. Customs."—[OFFICIAL REPORT, 14th July, 1969; Vol. 787, c. 48.]
That reply gave me the impression that no obscene or pornographic literature comes into the country, and that all the stuff we see on bookstalls is produced here. I can hardly believe that that is true in regard to a situation which we all know exists at present and has done for some time. Here again, I would have thought that greater control could have been exercised about the flood of literature now coming into the country. It will be noted that most of the laws which are designed to protect men, women and children from depravity and corruption are fairly recent, and take into account changing trends. Some hon. Members who may have other ideas about the future of this kind of legislation should bear in mind that it has been brought up to date in fairly recent times.
Many hon. Members will recognise the problem as arising from, the on the one hand, desire to prevent the circulation of obscene material and, on the other, the need to reduce restraints on personal liberty. But these terms are relative, for excessive liberty can easily become licence. In a society where people have gradually thrown away traditional safeguards, where moral standards are less easily defined, and where basic principles are not held in such high regard, the community must look to Parliament for protection, and that means that at least we should enforce the legislation

that we have and perhaps consider what changes should be made in legislation generally—

Mr. Deputy Speaker (Mr. Sydney Irving): Order. With that remark, the hon. Member goes beyond the scope of the Adjournment debate.

Mr. Bishop: I appreciate your help, Mr. Deputy Speaker. I am concerned today with the enforcement of the present legislation.
Those who talk glibly about the liberty of the subject must ask what liberty there is for our young people if society does not protect them from the grossly lowered standards and dangers which seem to be springing from our failure to enforce some of our present laws. What liberty is there for the young girl who, product of an over-permissive society, is bearing a child whose father she does not know and who will be restricted in normal girlhood by being an unmarried mother living on State benefit, or is struggling to maintain a child on the pittance of an affiliation order, or is desperately wanting an abortion she cannot have, or is afflicted with V.D.?
The figures in the last few years show clearly that the incidence of V.D. is rising, illegitimacy is increasing and the number of abortions which have taken place have certainly risen. This is the price society has to pay for not operating some of the legislation which is in existence as it could be operated. The situation makes a very great demand on the social services.
The phrase "Publish and be damned" may be a fine one, but it depends who is publishing and who is being damned. With depraving publications the reader may pay the price in the fullest sense of the word. We should be concerned not only with the terrible risks we are taking in the effects on children and young people, but on the chronic misuse of our resources. Although we are to some extent restricting increasing expenditure on education and on school books, we are at the same time spending hundreds of thousands of pounds on this disgusting trash. We are right to ask where the priorities lie.
Above all, this is a matter concerning people's dignity and anything that lowers and degrades human beings below the level of what their creator intended them


to be is to be decisively rejected. I urge the Minister to use his influence to have the Act considered afresh.

Mr. Speaker: Order. The hon. Gentleman cannot deal with that on this debate, which is an Adjournment debate. He cannot propose changes in legislation. He can only criticise the administration of the present legislation.

Mr. Bishop: Thank you, for your guidance, Mr. Speaker. I was making the point that we should have another look at the enforcement of the present legislation and was not suggesting that we should necessarily change the law.
Some will say that we need freedom for young people to make choices. These days the word "freedom" is bandied around a good deal. The morally weak and those without firm principles need our help when the choices have to be made. When they come to the crossroads of life, as they do every day, they are entitled to expect guidance and help from the legislation which is now on the Statute book. If we fail them today as they deal with these problems, then they will be right in the future to curse us for our failure to look after them.
Although we expend much energy on tackling grave economic and other industrial problems today, I feel that the biggest dilemma facing the country is a moral one. I hone that the Minister will be able to assure us that he will examine the legislation with a view to giving guidance to those who have to take decisions, to make sure the legislation is enforced, and that we have a clear definition of the meaning of the Act. I am sure the country will come to value the steps that we then take.

3.49 p.m.

Sir Douglas Glover: I shall not detain the House for many moments this afternoon. I rise prinicpally to congratulate the hon. Member for Newark (Mr. Bishop) for raising this matter in a very responsible way. It is a matter which ought to cause great concern to all hon. Members of this House and we are indebted to the hon. Member. I am sorry that there were so few hon. Members in the House to listen to what he had to say. We have the Obscene Publications Acts on the Statute Book. There can be little doubt in the minds of hon. Members who heard the hon. Member for Newark

that some of the publications to which he referred were designed with only one purpose—to corrupt and deprave. That is how they achieved their circulation. I think that in the courts there would have been little difficulty in bringing prosecutions under the Acts which would stand. I ask the Under-Secretary of State to give an indication of how many prosecutions under these Acts there have been in recent years. How are the Acts operated? What advice has been given on their operation?
The last Act brought about a great reduction in the flow into this country of literature from America for children. But it did not stop the flood of equally dangerous matter arriving in its place. If we were able to stop one type of literature it seems to me that we ought to be able to stop another type on similar grounds.
Many of us are disturbed by what we see in the bookshops and on periodicals stalls and at street corners, particularly in London. We are disturbed by the sort of publication which is being produced. But they appear to me to be almost ready for the Sunday school collection compared with some of those mentioned by the hon. Member for Newark, which shocked and appalled me, for they are way beyond anything which appears on the ordinary bookstalls. Apparently these publications can be advertised, and presumably sold, through the Press—a publication designed to advertise other publications which are produced purely to deprave and corrupt. That seems to me to offer a classic case in which the courts could have stepped in and taken some action. I ask the Under-Secretary of State whether action will be taken through the courts or whether advice will be given by the Home Office, because it seems to me that the hon. Member for Newark has painted a picture which needs action and not just words.

3.52 p.m.

Mr. Kevin McNamara: First, I apologise to the House and to my hon. Friend the Member for Newark (Mr. Bishop) for having been a few moments late for the start of the debate.
I was much impressed by what my hon. Friend said on a subject which is causing worry to many people, including teachers, parents, leaders of society and


others who are concerned about the moral attitudes of the nation. My hon. Friend has not raised a question simply involving curtailing people's liberty or range of choice. Indeed, I am the first to agree that individual responsibility is what matters in these cases. But the individual responsibility of a parent or a teacher must at times be backed by legislation and by the enforcement of existing legislation. We must, therefore, be grateful to my hon. Friend for having raised this point and we look forward to seeing the legislation being more rigorously enforced, if that is possible.
At times it is very difficult for the police to enforce this type of legislation as so much depends upon legal decisions, on points of law. On occasions much criticism can be levelled against the police if, for example, in one area they seem to be enforcing the law while in another area offenders go scot free. There is bound to be criticism if a publication is banned in town A with the result that its sales rocket by 5,000 in town B. It is a most difficult situation for the police, and we are almost driven to the conclusion that if we are to have a law is should be enforced and that if we do not enforce a law, there is not much purpose in its being on the Statute Book.
May I turn from the immediate problem which my hon. Friend raised to a problem which is somewhat akin to it and which concerns not only young people but the whole range of our society at every age level. This is something to which he referred in mentioning the Julian Press. He went into detail, saying what the Julian Press stated that it was offering. The first criticism here must cause great difficulties in people in legitimate postal sales business. That is the way in which this organisation seems to have worked. It has engaged in indiscriminate postal advertising throughout the nation. So far as I can gather, it has been working either with telephone books or with electoral registers for the names and addresses of people to whom it sends this publication.

Mr. Hugh Delargy: Would my hon. Friend repeat the name of that press, since we did not catch it?

Mr. McNamara: The Julian Press.
It is one thing to say that a person is entitled, if he wishes, to go into a book-

shop and buy a particular volume. It is another thing if, as a result of this type of indiscriminate advertising there is an invasion of his privacy and something which can cause great distress to people in his home if they receive an envelope containing an advertisement.
These can go to all sorts of people. My wife received a telephone call yesterday from a woman who had been widowed for 23 months who had received an advertisement advising her on how to get a book on sexual techniques. It has come addressed to young people as well, some of whom had just reached adolescence, and who had the same initials as their parents. It came addressed to me, yesterday morning, which shows a certain lack of discrimination by the organisation; after all, I had put down Questions earlier this week on the subject. It went to registered celibates, to ministers of religion and even to the chief detective superintendent of my local police force—

Mr. Speaker: Order. The hon. Gentleman must tell us what the Minister can do about indiscriminate posting.

Mr. McNamara: Yes, Mr. Speaker, I was coming on to that.
Because of this, the Minister should consider this situation very carefully. The objection here is not only to the intrusion of privacy but also on the grounds which my hon. Friend mentioned when he was talking about the standards which we expect in our society, and the lead which we should be giving to people.
The thing which I find most objectionable about this type of literature and advertising is this, printed in red in one of their publications:
For only with the universal acceptance that the path to a complete and enduring human relationship lies through the fullest sexual ecstasy between a couple in love does this book have such immediate relevance.
I find this particularly appalling. Obviously, sexual relationships have a most important part to play in the relationship between married people, but it is not the only part. It is, perhaps, of major importance in some relationships, but it is not in others.
But the whole feeling behind this type of advertising is that only if a person reaches a degree of sexual perfection in what are commonly termed "techniques"


will there be a lasting or a happy marriage. This is not what marriage is completely about. It is also about raising children, about tolerance and respect for individuals and about understanding of their dignity and their nature. The attitude of these books is the sort of atmosphere which says that sex, and sex alone, is the key. It is this literature that I find most objectionable —

Mr. Speaker: Order. I am not questioning anything which the hon. Gentleman has said, but he must come to what the Minister can do about it without changing the law.

Mr. McNamara: Yes, Sir. This is where I can see that the police may have a difficulty. If one enforces the Post Office laws, as my hon. Friend said, it is an offence only if the material is sent through the post. It is doubtful whether an invitation sent through the post to treat for these articles creates an offence. The police are therefore in a very difficult position—

It being Four o'clock, the Motion for the Adjournment of the House lapsed, without Question put.

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Fitch.]

Mr. McNamara: If the police were to send £3, and received this publication through the post, would they, while trying to protect society, be inciting other people to commit a crime or procure the committal of a crime? I wonder what sort of advice the Home Office will give to chief constables about advertisements of this nature which tread the tightrope between legality and illegality with such delicacy.
This whole matter has caused tremendous concern throughout the country. It was raised at a public meeting on a local housing estate in my constituency last Friday evening. A great number of hon. Members have had correspondence on the subject. People are at a loss to know what they can do to protect themselves, their homes and their families against this invasion of privacy. My advice to them is to tear up the advertisement and post it back in the prepaid business reply envelope they receive from

the firm, so showing their contempt and putting the firm to some expense.
The case of the Julian Press has come up because it was published and has been written about, but the Under-Secretary knows that hon. Members have written to the Department on many occasions, and have sent examples, of the sort of thing sent through the post which has caused offence. We have never raised the subject on the Floor of the House because we have not wished to give these people cheap publicity. After all, if one publicises small boys throwing bricks over railway bridges as a result of which an engine driver is killed, someone else may follow their example. This is a serious matter, and it deserves the attention of the House.

4.3 p.m.

The Under-Secretary of State for the Home Department (Mr. Merlyn Rees): Before I make any comment on the subject raised by my hon. Friend the Member for Newark (Mr. Bishop) and spoken to by other hon. Members, I should like to make the Home Secretary's position quite clear. My right hon. Friend is responsible for the form of the law relating to obscene publications but he has no responsibility for the enforcement of that law. Enforcement is entirely a matter for the police and for the Director of Public Prosecutions. This is not only true of the matters raised by my hon. Friend the Member for Newark, but answers the question posed a moment ago by my hon. Friend the Member for Kingston upon Hull, North (Mr. McNamara). Although, therefore, I can say without hesitation, as a parent and as a former teacher, that I agree with my hon. Friend's view of much of the material to which he has referred, it is not for me, as a Minister, to give any opinion in the way in which the law is enforced.
Here, perhaps, I may correct the impression given by my hon. Friend the Member for Newark when he said, in effect, that Ministers have accepted that though this material may shock and disgust it does not corrupt or deprave. Ministers could not express any opinion on the material: they could merely give information about the current interpretation of the law by the courts, the Director of Public Prosecutions and the police.
I should like to give as much information as I can about enforcement proceedings to help the hon. Member who is particularly concerned about magazines which are displayed at, and can be readily bought at, ordinary bookshops and bookstalls. In raising this issue he focused attention on material which offends against the present law.
I think it relevant to mention that a great many foreign magazines which otherwise might find their way on to our bookstalls are prevented from doing so by the operation of Section 42 of the Customs Consolidation Act, 1876. This prohibits the importation of obscene prints, paintings, photographs, books, cards lithographic or other engravings or any other indecent or obscene articles.
If Customs officials come across material subject to this prohibition, they have power to detain it under the Customs and Excise Act, 1952. The hon. Member was given information about the number of books and magazines seized in this way during the past 10 years in a Written Answer yesterday to a Question put by him to the Chancellor of the Exchequer. Perhaps, because it is important, I would take the opportunity of correcting the report of this information given on page 2 of this morning's Times, in case it misled my hon. Friend and other hon. Members. All the material seized was forfeited and probably destroyed, but in every case of seizure the importer is sent a notice which gives him the right to show that the goods are not liable to seizure.
When such a claim is made, the case can be taken to a magistrates' court for the magistrates to decide whether or not the material in question is indecent or obscene. In 1968–69 and 1960–61, no such claims were made. In 1964–65 proceedings were undertaken as a result of claims and 152,254 books and magazines were forfeited after the proceedings in addition to the material destroyed without proceedings being taken. Because I think it important to develop this point, I will broaden the Answer given to my hon. Friend. In 1966–67 165 trade seizures involved 1,280,292 magazines, in 1967–68 245 trade seizures involved 611,917 magazines and in 1968–69 164 seizures involved 792,211 magazines. I have dealt only with magazines, although

of course there are relevant figures for books as well. I hope this clears up any possible misunderstanding as to the scope of this part of the legislation.
The essential purpose of the Customs legislation is to deal with commercial consignments of pornography and most of the material seized in this way consists of trade consignments, shipped in bulk, usually from publishers in the United States sent to booksellers in this country. This brings me to the point made by my hon. Friend about the operation of the Children and Young Persons (Harmful Publications) Act, 1955. My hon. Friend said that the fact that no proceedings were brought under that Act since its enactment suggested that it has not been properly operated, but the primary purpose was to supplement the Customs legislation by deliberately prohibiting the importation of large numbers of horror comics. This was totally successful in that the mischief ceased immediately the Act was passed.
There has subsequently been little attempt to import horror comics, and there has been no prosecution for publishing them here. Generally, the kind of magazines to which my hon. Friend has referred would not be covered by the definition of "harmful publications" contained in the 1955 Act, since its main concern was with books or magazines consisting wholly or mainly of stories told in pictures. If these magazines are considered to be harmful, therefore, it would be more appropriate to prosecute under the Obscene Publications Act, 1959 and 1964, than under the 1955 Act; and that is why it has not been necessary to use the latter.
The prevention of the importation of indecent and obscene magazines deals with only one part of the problem. As regards material published in this country, the Obscene Publications Acts, 1959 and 1964, make it an offence to circulate, sell, let on hire, give, lend, or offer for sale or for letting on hire any obscene article. If the magazine to which my hon. Friend referred are obscene, proceedings can be taken.
I have already said that the enforcement of the law is a matter for the police. It is open to anyone who thinks that a particular magazine or book or any other article is obscene to give full particulars


to the police, who will decide whether proceedings should be instituted. In most instances the police will consult the Director of Public Prosecutions, who will be able to advise them as to whether action under the Obscene Publications Acts would be appropriate. In giving this advice, the Director takes into account his knowledge of the general attitude of the courts and the consideration that the publicity attending an unsuccessful prosecution may well result in an even greater distribution of the kind of material complained of.
My hon. Friend quoted from a publication that he said had been found in the West Riding and which, I think he said, had been purchased at or which came from—I am not quite certain—premises in my own city of Leeds. Because this is now, as I understand it, in the hands of the Director of Public Prosecutions, it is not a matter on which I should comment today.
Whatever view the Director holds, it is also open to any individual to initiate a private prosecution, although, for a variety of reasons, this is rarely done. I cannot say how many proceedings are taken under the Obscene Publications Acts against the kind of magazines at present in question, because books and magazines are not recorded separately for statistical purposes. However, the number of people prosecuted under these Acts in 1966 was 115, in 1967 it was 105, and in 1968 it was 124. Therefore, there can be no doubt but that action is being taken to enforce the Acts, but whether publishers of those particular magazines are prosecuted must depend on whether the magazines are thought to be obscene within the meaning of the Acts.
This brings us to the central issue. What hon. Members, my hon. Friend the Member for Newark in particular, have been saying is that there is a difference of opinion over what constitutes obscenity for the purpose of the criminal law. It is, therefore, the definition of "obscenity" to which we must look. The definition is as follows, and it is this that we have to take into account:
an article shall be deemed to be obscene if its effect…is, if taken as a whole, such as to tend to deprave and corrupt persons who are likely, having regard to all relevant circumstances, to read, see or hear the matter contained or embodied in it.

This definition in the 1959 Act follows the recommendation of the Select Committee on Obscene Publications which reported at the beginning of 1958. The Committee based its definition on the ruling of Chief Justice Cockburn in 1868 that the test of obscenity should be
whether the tendency of the matter charged as obscenity is to deprave and corrupt those…into whose hands a publication of this sort may fall.
As Mr. Justice Stable pointed out in Regina v. Secker in 1954, the charge is not that the tendency of the article is to shock or disgust, but to deprave and corrupt. The Committee considered that, although the expression "deprave and corrupt" was difficult to define with academic precision, it would be preferable to retain it in default of a better alternative. They considered the possibility of starting afresh with a completely new definition but agreed with the Society of Authors that this would be merely "swapping horses", and that we should find ourselves in the courts forced back on the use of dictionaries and, following the inevitable circle, come right back to where we began. This is why the basic definition of obscenity—the tendency to deprave and corrupt—was left unchanged.
The Committee recommended that the common law definition should be clarified in two respects. In the first place, they agreed that in determining whether the tendency of the material was to deprave and corrupt the work should be judged "as a whole". This means that the courts cannot look at a single illustration of the kind described by my hon. Friend and decide on the basis of that one picture that a whole magazine is obscene or indecent under the Act. This may seem over-liberal, but the alternative, under which the work could be judged obscene by reference to isolated passages without considering the total effect would, as the Committee pointed out, if taken to its logical conclusion, deprive the reading public of the works of Shakespeare, Chaucer, Fielding and Smollett, except in expurgated versions.
The second clarification was to require that all the circumstances should be taken into consideration when deciding who would be likely to read or hear the material concerned. This requires the court to look at the circumstances in


which any article is circulated or distributed, and enables a narrower view to be taken of obscenity where direct distribution to young people is concerned. A special safeguard is thus provided for them. This means that the fact that a magazine has been on sale in a shop in which children can buy sweets and comics—the situation which was of particular abhorrence to my hon. Friend—would be a relevant consideration in any criminal proceedings.
I have spent some time describing the definition of obscenity and have taken advantage of the little extra time that we have because this is the important matter in the answer to my hon. Friend and in the wider discussions that are taking place. The definition is wide and enables proceedings to be taken against these magazines under the Obscene Publications Acts, if they have a tendency to deprave and corrupt. This brings me back to that central issue.
The definition contained in the Acts is wide enough to cover anything which may be considered obscene, but it is for the courts to decide in any particular instance whether any material is obscene, whether it has a tendency to deprave and corrupt. It was the deliberate intention of Parliament that this should be so.
I should point out that what may be considered indecent or obscene in one context may not be in another. What may be acceptable in a medical text book may not be acceptable in a teenager's magazine. That is why it is essential that the courts should be able to decide, as a matter of fact, in the circumstances of each case, whether the material complained of is of such a character as to make it criminally obscene.
But it is not only a question of facts. The concept of what is likely to deprave and corrupt changes rapidly. When George Eliot's novel "Adam Bede" was first published in the last century it was considered as indecent and likely to corrupt because it gave a detailed description of the experiences of an unmarried mother. Such condemnation would be unthinkable now. In the last 10 years concepts of indecency and obscenity have changed perhaps more rapidly than ever before. That is a matter in which it

is impossible to arrive at objective criteria.
May I quote the leader in The Times last Wednesday, which commended itself to me and perhaps it will do so to the House:
There will probably never be a truly satisfactory law of obscenity. Its application will always depend to some extent upon subjective judgment and therefore on prevailing fashions of thought.
I think it would be relevant if in this debate I mentioned that the Select Committee specifically said that in drafting their amended definition they had been particularly careful to avoid increasing the existing difficulties in dealing with the trade in pornography while making sure that there should be no undue interference with the free expression of opinion and the rights of the individual, which characteristically my hon. Friend the Member for Kingston upon Hull, North used as the starting point in what he had to say. The Select Committee was treading the difficult path between total permissiveness and unjustifiable restriction. It was attempting to achieve a rational balance between the views of those who believe in complete freedom of expression and those who believe that expression should be more strictly regulated. This question is now moving into the field of current discussion, but that is what the existing legislation is based upon.
It would be outside the scope of this debate to comment further on definitions. I have tried to show that the definition does bite in a good many cases which, I think, concern hon. Members. At the same time, we have to remember that what we are dealing with is conduct which should be a criminal offence. We are not dealing with immorality. Immorality as such is not an offence against the law. We are dealing with an area in which it is necessary to draw a line between what is simply offensive and what is so offensive and harmful as to justify involving the sanctions of the criminal law to eliminate it.
There are no objective criteria which show where that line is to be drawn. The function of the present law is not to lay down an immutable standard of test but to provide means of proscribing material where it can be shown that such material is harmful because of its tendency to deprave or to corrupt.
I come now to the point raised by my hon. Friend the Member for Kingston upon Hull, North, who complained that his constituents had received distasteful circulars through the post without having asked for them. The same matter has been raised by other hon. Members in recent months. My hon. Friend mentioned one of the publications, and there is another which hon. Members have written to me about as well.
It is possible to take action against material sent through the post if it comes within Section 11 of the Post Office Act, 1953, which prohibits, among other things, the sending of a postal packet containing anything indecent or obscene. This enables me to reply also to my hon. Friend the Member for Newark on a similar point. Use is made of that provision. In 1968, about 6,000 postal packets were found to be in contravention of it. Most of the material was detained and destroyed, and successful prosecutions were taken by the Director of Public Prosecutions in 21 oases. The Obscene Publication Acts, 1959 and 1964 also may have some bearing if the material tends to deprave or corrupt anyone likely to read it.
We have referred the circulars to the Director of Public Prosecutions, who has decided that the circulars themselves cannot be considered either indecent or obscene, even if the books which they advertise are indecent or obscene. There would, therefore, be no action which could be taken against the circulars. In view of the Director's opinion that pro-

ceedings should not be taken against these circulars, I have advised other hon. Members, and I advise my hon. Friend, that their constituents should write to the publishers of the circulars telling them that they do not wish to receive any more material of that kind. Also, I think, the variation on that theme suggested by my hon. Friend the Member for Kingston upon Hull, North might commend itself to other hon. Members.
My hon. Friend the Member for Newark has rendered a valuable service in raising this subject. I am inclined to think that a social climate in which issues of this kind are seen as subjects for serious concern and discussion is a healthier one than when debatable issues are thought to be soluble in, so to speak, absolute terms, and I think that it is healthy also that the subject can be discussed at all, as it might not nave been in some circles 10 or 15 years ago. There is no doubt that the question of how far the criminal law should control what we can or choose to see and read is exercising many people. I hope that I have made it clear that the solution to the present difficulties inevitably involves some subjective judgment, which can only be left to the determination of the courts in individual cases. This is a responsibility which the police and the courts are continuing to discharge.

Question put and agreed to.

Adjourned accordingly at twenty-five minutes past Four o'clock.